Bloomberg News

Power Finance of India Says Lending Rising on Renewables Growth

June 20, 2012

Power Finance Corp. (POWF), India’s largest state lender to electricity utilities, said a renewable-energy boom will support growth in loans as the country seeks to double clean-power capacity by 2017.

Loan disbursal at Power Finance increased 31 percent in the year through March, compared with a 25 percent gain the previous year, Chairman Satnam Singh said in an interview in London. The lender expects to maintain that pace as growth in renewable energy counters a decline in coal-power projects.

India, reliant on coal for most of its electricity output, has spurred development of its solar, wind and hydropower industries by offering federal and state incentives. Prime Minister Manmohan Singh has earmarked more than $300 billion to expand the country’s electricity system, and an increasing share of that investment will fund clean-power projects as lenders shun new fossil-fuel plants amid rising fuel costs.

As renewables projects gain momentum, loan distribution has sped up, Chairman Singh said last week. Loans granted by Power Finance are counted as income-earning assets when they’re disbursed, a process that’s quicker for solar and wind than for thermal-power plants because they’re quicker to build, he said.

Power Finance’s renewable-energy loans, less than 2 percent of its total loan book last year, may rise to about 10 or 12 percent in five years, Singh said.

Loan Disbursal

The New Delhi-based lender approved about $189 million of loans for renewables in fiscal 2011, according to Singh. Loans approved and still to be distributed in fiscal 2012 total $187 million, on top of $52 million already paid out, he said. Power Finance has disbursed $418 million of loans to date, he said.

India is seeking to increase clean-power capacity to almost 53,000 megawatts by 2017, when it forecasts 9 percent economic growth. Utilities are adding renewables projects as a hedge against inadequate fossil-fuel supplies in a nation where 56 percent of electricity is generated from coal.

Power Finance is able to make loans for renewables at rates that are 25 basis points below the “normal” rates as it seeks to encourage projects, Singh said.

The chairman was in London for talks with banks to raise $250 million, which includes a $100 million three-year loan with a $150 million so-called greenshoe option, whereby amounts may be increased, he said. Bank of Tokyo-Mitsubishi UFJ Ltd. and Mizuho Corporate Bank Ltd. are the lead arrangers, he said, adding that he expects to close the deal this month.

To contact the reporter on this story: Sally Bakewell in London at Sbakewell1@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net


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