IFC to invest $15 mn in Simran Wind Project

The International Finance Corporation (IFC) will provide up to $15 million in corporate equity financing to Simran Wind Project Private Limited (Simran), a privately-owned entity which is into wind-based power production. The company will use the money to finance its pipeline projects worth $40 million in Tamil Nadu.

Presently, the company has installed capacity of 50.4 Mw in the states of Karnataka and Tamil Nadu and is now expanding its wind power capacity for a total new capacity of about 126.9 Mw in the state of Tamil Nadu in Muthianpatti, Amdhapuram and Rasta. Through this investment, IFC supports a company which will add approximately 200Mw of renewable energy generation capacity over the next 2 years to meet the growing electricity demand in India.

Simran is promoted by Techno Electric and Engineering Company Ltd (Techno) which is a power EPC company-based in Kolkata in India and holds 100 per cent shares in Simran. P P Gupta is the key promoter of Techno which is a listed company.

IFC will provide up to $15 million in corporate equity financing to the company to finance its pipeline projects and up to $40 million in debt financing in the form of IFC ‘A’ Loan to Simran for financing the 126.9 Mw wind projects. The tenor of the ‘A’ loan will be up to 12 years with a grace period of up to three years.

The IFC Post-2012 Carbon Facility (the facility) proposes to forward purchase up to 1.75 million Certified Emission Reductions (CERs) to be generated through 2020 by Simran’s wind power projects. Simran will receive from IFC a pre-determined percentage of the CER spot price at the time of delivery, subject a floor and a cap. IFC will on-deliver CERs delivered by Simran to the participants in the facility on a pro-rata basis, according to the corporation.

The project helps to mitigate negative climate change impacts by helping avoid GHG emissions.

IFC has said 80 per cent of power generation in India is still state-owned, with all major players focused on large thermal and hydro power projects. In line with its mandate, IFC’s participation in this project will help stimulate private sector development within the renewable energy generation sector.

IFC’s participation will provide a “stamp of approval” to a mid-tier renewable energy company at an early stage to develop its business and facilitate its current and future fund raising.

The facility will purchase CERs generated by Simran’s renewable energy projects up to 2020 at a price indexed to the market price at the time of delivery, subject to a floor. This will help the company address the present uncertainty in the carbon markets beyond 2012.