POWER FI­NANCE

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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.

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