Hindustan Power to consider new streams of finance

To commission 1,320 Mw coal and 1,000 Mw solar projects

Hindustan Powerprojects Private Limited (HPPPL), with its plan to add 1,320 megawatt (Mw) coal-based power in three to four years, is not just an outlier in an industry, otherwise adding green capacity. It has also started looking at several financing options for funding capacity addition. It includes an initial public offering (IPO), tapping global wealth funds and infrastructure bonds for its upcoming project pipeline.

HPPP is in the process of filing an IPO but the timing would hinge on market conditions. It is also actively considering raising funds through infrastructure investment trusts (InvITs), said Ratul Puri, chairman, HPPP. The company needs close to Rs 15,000 crore in several phases over the next three to four years.

Besides coal, it is looking at 1,000 Mw solar capacity over the next two years. The company has already sold solar projects to global insurance funds. In an interaction with Business Standard, Puri said both conventional and renewables should now look at new streams of finance. He added that interest rates need to fall further for cost of solar to stabilise. "Banks don't have further room to lend to the sector. Bond market in India has got to develop, as the infrastructure sector in India cannot expect to finance the conventional way from public sector banks," said Puri.

He said power sector alone would need Rs 35 lakh crore in the next five years, while the exposure of banks in infrastructure is close to Rs 11 lakh crore.

"Eventually, companies would have to directly access public savings. We need to develop an overseas bond market. We have looked at various mechanisms and InvITs are a good tool to put a mature asset in the hands of consumers," said Puri.

PPP has sold close to 400 Mw of solar assets to global retail funds such as insurance companies and pension funds outside India. "The model is simple. We develop an asset, finance it through banks and sell it to global agencies, post-construction," said Puri. He did not disclose the names.

HPPP has completed the first phase (1,200 Mw) of Anuppur coal-based projects in Madhya Pradesh and will now take up the second phase (1,320 Mw). The company also plans to start Chhattisgarh coal power plant of 1,320 Mw.

"We are waiting for the government to either award incremental linkage or coalmine for this project and we would bid accordingly," he said.

The plan, he said, is to "invest close to Rs 10,000 crore in Anuppur. We would look at infusing Rs 5,000-6,000 crore in building 1,000 Mw of solar in the next 12 to 18 months."

HPPP's solar projects, which are in the pipeline, are the ones that won at the tariff of Rs 6-7 per unit and the company is watching the tariffs to stabilise, before it participates in the bidding again.

Solar tariffs have fallen sub Rs 4.5 per unit in the past year. Puri is of the view that solar tariffs need to get rationalised sooner for better returns to long-term players.

"There is no more room for capital cost to come down. Tariffs need to go up slightly for participative players to come in. In the next six to 12 months, we would see tariffs stabilise at Rs 5-5.5 per unit," he said.