Ashok, Haldia, MD & CEO, PTC India Financial Services Ltd (PFS) talks about funding availability in the market and the steady shift happening from conventional to renewable energy projects, in an interview with Monica Chaturvedi Charna...
What is PFS’ target for 2016 with regard to raising funds through debentures, etc. and subsequently lending for power projects? When are you planning your next issue?
Changes are taking place in the power sector and owing to the government’s policies and initiatives, sentiments are turning positive.
Though it sounds positive for the consolidation and growth of the sector, the consolidation will mostly take place in the conventional sector and the growth will happen in the transmission and distribution, and renewables sectors.
There is a huge scope available for financing in the areas of generation, renewables (primarily in solar equipment manufacturing) and rooftop solar. We are working at positioning ourselves for financing decentralised power generation projects.
The investors’ confidence in the sector is quite strong now, owing to the reduction in the cost of equipment, O& M cost, etc. The larger players have the ability to negotiate the rates for O& M, capital equipment and have access to cheaper and alternative funding options. Taking into account the overall funding scenario and the investors’ confidence in the sector , I feel the target of 100 GW of installed solar power target by 2022 is achievable.
How much capacity have you already financed in the renewable energy space and particularly in the rooftop solar segment?
In the renewables space, we had financed Rs 7,282 crore as at December 31, 2015 compared to sanctions worth 4,996 crore as at December 31, 2014, registering a 46 per cent growth in sanctions to renewable projects.
Renewable projects constituted 45 per cent of the loan book as at December 31, 2015. PFS has financed around 3-4 rooftop projects for the developers, till date. Besides, we have also financed projects in the transmission space. We had committed to finance 6,000 MW of renewables of the value of 30,000 crore, over a period of 5 years. We are confident of crossing this milestone in the time to come.
Any plans of raising funds through debentures, etc.?
For raising resources, we are constantly exploring alternate sources. We recently took ECB and lineof-credit from financial institutions. In the current financial year, we have already raised debentures from two different financial institutions – 214 crore from International Monetary Fund (IMF), and 150 crore from Netherland-based financial institution, FMO.
What are the kinds of lending that you undertake?
We engage in 3 types of lending – complete underwriting; underwriting with an option to downsale or syndication wherein, a part of the loan is arranged by us and the remaining we downsale. Thirdly, we become part of a consortium which has a lead lender. The type of lending depends upon the requirement and our level of exposure i.e. if we are not in a position to undertake the entire amount, then we partner with a consortium.
What is the current rate of financing for renewable and conventional power projects? Is it lower (more feasible) than what the banks charge?
Our lending rates are very competitive as compared to the banks and financial institutions, but it also depends upon the risk profile of a particular project.
Having said this, the rate of lending for renewable projects hovers around 11.25-12.25 per cent although it may go down further if the risk profile of a project is lower. We have not taken up any fresh conventional (coal based) projects in the last one year, primarily because no new thermal projects have come up.
Are you completely shifting from financing conventional to renewable energy projects?
Earlier, conventional projects comprised 65 per cent of the pie and renewables had 25 per cent share. Reflecting a major turnaround in recent years, 60 per cent of the current lending is for renewables (solar holding 30-33 per cent share) and remaining 40 per cent is for conventional projects. So, the loan book is definitely tilted towards renewables and more so, towards solar. In addition to this and in order to dispense our risk, we have decided to take up projects in the infrastructure space including ports, mining, roads, highways, etc.
While biomass occupies a very small share of the entire pie of the renewables, it surely has a lot of potential. Are you looking at financing biomass projects?
Biomass does hold a lot of economic value for the local regions and between 2007- 09, PFS also financed a couple of projects in this space. But, our overall experience with these projects was not encouraging, and of late, we haven’t come across any fresh projects. The biomass sector needs a good biomass procurement and management system and regulatory certainty. If these steps are taken, then we are open to financing biomass projects. However, since the tariff rates are not keeping pace with the biomass rates, projects have suffered.
The MNRE is procuring funds for rooftop projects from ADB, World Bank and the BRICS development bank. How is the scenario of the domestic banks and non-banking finance companies with regard to financing rooftop projects?
No new projects are coming up in the thermal generation space so banks currently have significant amount of liquidity with them. The investment being made by the foreign banks is for a period of five years, and both domestic and international investors are optimistic and upbeat. Till 3-4 years back, there were a lot of reservations regarding solar power, which have now sublimed. The investors’ confidence in the sector is quite strong now, owing to the reduction in the cost of equipment, O&M cost, etc. The larger players have the ability to negotiate the rates for O&M, capital equipment and have access to cheaper and alternative funding options. Taking into account the overall funding scenario and the investors’ confidence in the sector , I feel the target of 100 GW of installed solar power target by 2022 is achievable.