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India to tap Middle East for funding power projects
Monday, 10 March 2003, 20:30 IST
NEW DELHI: An Indian power funding agency hopes to tap financial institutions, banks and non-resident Indians (NRIs) in the Middle East for funds to accelerate new projects.
"We have brought in this year around $100 million, raised mostly through banks and financial institutions in Japan, Hong Kong and the UAE (United Arab Emirates). This is for a seven-year period," said Power Finance Corporation (PFC) chairman and managing director A.A. Khan.
"In addition we have got a $150 million line of credit from ADB (Asian Development Bank)," he added.
Despite the threat of war in Iraq, Khan said he foresaw little impact of this on the UAE and was confident the state-owned PFC would be able to generate more funding from the emirates.
He, however, would not say how much had been raised from the Middle East and how much more PFC hoped to attract from there.
With very little private investment available to meet the country's target of adding 100,000 MW to double generating capacity by 2012, PFC sees a major role for itself in the funding process.
From approaching institutions for funds to public offerings, PFC is mulling various alternatives including setting up an India Power Fund, mooted more than a year ago, according to Khan.
"Despite the fact that commercial borrowings from overseas will now attract withholding tax and add around 1.5 to 2.0 percent interest, we feel NRIs could be a good source for mobilising (10-year) long-term funds," Khan told IANS.
"We hope the political situation in the Middle East will stabilise soon for us to finalise the proposal to tap banks and NRIs."
During the last five years, of the 
850 billion spent by the government in adding new generation capacity, PFC provided 160 billion.
"To help achieve the target of adding 100,000 MW, an estimated investment of 8 trillion would be required. With not enough investment coming from independent power producers (IPPs) because of the perceived weakness of the power utilities and their inability to make payments for power purchases, we see a major role for PFC in pushing ahead projects," said Khan.
While waiting for power sector reforms by the states to show results, Khan sees the PFC as spurring investments not only in power generation but also in transmission and distribution.
Given its sovereign rating by international rating agencies, PFC has had no difficulty in raising funds from overseas or domestic sources.
Anticipating it will close the 2002-03 fiscal with a 10 billion net profit, PFC is currently well placed to meet its disbursement commitments. It has recorded 98 percent recoveries of its due in 2001-02 and expects similar results for 2002-03.
Plans to raise more resources for the new fiscal would be finalised sometime in April "as we see no sense in raising resources till the projects start rolling. We have liquidity for three months at all times so as not to keep projects waiting," said Khan.
As India has set a target of adding around 44,000 MW by 2007, PFC is planning to mobilise more funds to help achieve this by providing at least 20 percent of the resources.
Source: IANS
850 billion spent by the government in adding new generation capacity, PFC provided 160 billion.
"To help achieve the target of adding 100,000 MW, an estimated investment of 8 trillion would be required. With not enough investment coming from independent power producers (IPPs) because of the perceived weakness of the power utilities and their inability to make payments for power purchases, we see a major role for PFC in pushing ahead projects," said Khan.
While waiting for power sector reforms by the states to show results, Khan sees the PFC as spurring investments not only in power generation but also in transmission and distribution.
Given its sovereign rating by international rating agencies, PFC has had no difficulty in raising funds from overseas or domestic sources.
Anticipating it will close the 2002-03 fiscal with a 10 billion net profit, PFC is currently well placed to meet its disbursement commitments. It has recorded 98 percent recoveries of its due in 2001-02 and expects similar results for 2002-03.
Plans to raise more resources for the new fiscal would be finalised sometime in April "as we see no sense in raising resources till the projects start rolling. We have liquidity for three months at all times so as not to keep projects waiting," said Khan.
As India has set a target of adding around 44,000 MW by 2007, PFC is planning to mobilise more funds to help achieve this by providing at least 20 percent of the resources.
Source: IANS