Reliance Power mulls borrowing from Chinese banks for hydro power projects

To support the recently acquired hydro power assets from Jaypee Power Ventures Ltd (JVPL), Reliance Power could look at Chinese banks for lending around Rs 9,500 crore. Some market experts said the debt amount could be even more. Reliance Power refused to disclose any information on the same.

“The company has earlier taken loans from Chinese banks and has much experience of taking debt at low rate of interest from the same for its coal-based Sasan thermal power project. It is most likely to follow the same route in the hydro sector as well,” said one of the executives close to the developments.

Reliance CleanGen, a wholly-owned subsidiary of Anil Ambani-controlled Reliance Power, on Sunday signed a memorandum of understanding with Jaiprakash Power Ventures Ltd (JPVL) on Sunday to buy off the company’s entire hydro power portfolio. The deal size, as shared by sources at Reliance Power, is Rs 12,000 crore, out which the company will infuse Rs 2,500 crore as equity, rest would be debt.

DRAGON MONEY

• The company has earlier taken loans from Chinese banks and has much experience of taking debt at low rate of interest from the same for its coal-based Sasan thermal power project
• Experts say the rate of interest offered by state-owned Chinese banks are quite attractive, running into single digit at times

“The rate of interest offered by state-owned Chinese banks are quite attractive, running into single digit at times. This, though usually happens if equipment are also sourced from the country,” said Kalpana Jain, senior director, Deloitte.  The current rate of interest for loans sought by power projects is around 12-14 per cent, though Chinese federal banks offer cheap debt in the range of 7-9 per cent, at the minimum, said Jain.

A Mumbai-based power sector expert, however, said an Exim Bank lending kind of an arrangement is not possible with a private player and also when it has acquired operational assets, which do not even need equipment.

Earlier, Abu Dhabi National Energy Company, or TAQA, pulled out of an agreement to acquire two of JPVL’s hydro power plants, valued at Rs 9,689 crore, on Thursday. “The concessional terms of credit are possible only when either equipment or service is sourced from the lending country. The company we are discussing here would have to look at multi-lateral funding agencies or development finance institutes that want to leverage their portfolio in hydro or clean energy,” said the expert on Reliance Power. He added that majority of the equipment in the Sasan Project were sourced from China and hence got cheap loans at throwaway interest rates. The Sasan power project of Reliance Power that has a capacity of 4,000 Mw and valuation of Rs 19,400 crore is funded by a 75:25 debt equity ratio. The lenders include a consortium of 12 state-owned banks led by SBI and other financial institutions.