Pfc Pens New Lending Norms

Power Finance Corporation (PFC) has put in place a new set of lending norms whereby borrowers would be classified into three categories, with AAA-rated entities, both in private and public sectors, getting maximum preference in terms of lowest lending interest rates.

Besides, it has finalised a new set of lending norms to finance suppliers to power projects also.

As per the revised norms among non-triple-A rated entities, public sector utilities would form the next category, with independent power projects (IPPs) coming in last on the priority list, PFC chairman and managing director A A Khan said.

Previously, PFC classified borrowers into two broad categories -- one comprising public utilities (both Central and state) and IPPs forming the other category, with the latter getting funds at a higher interest rate of around one per cent compared with funds given to the public sector utilities.

The earlier policy of stoppage of funds to past defaulters has also been abrogated, Khan said. As per the new lending norms, which has been put in place from December 1, 01, past defaulters would be given conditional access to additional funds but at a higher rate of interest. Disbursements would depend on their adherence to the deadlines for repayment of funds, Khan said.

To diversify its activities, PFC is now planning to fund suppliers to power projects also. The corporation is planning to step in to bridge short-term working capital needs of utilities.

For instance, in case of bulk consumers of power such as railways, who get power from the state electricity boards (SEBs) and pay them after a period of time, PFC would step in and pay up the SEB instantly and recover the money from the consumer along with a premium.

PFC will also now fund all sectors associated with the power sector. "If it is a captive coal plant, LNG terminal for use by a power plant, PFC will now look at funding such ventures," Khan said.

In a bid to enhance capacity addition strategy in the states' sector, the company has chalked out new norms. Any company can approach PFC for funds to set up a project. The corporation will, in turn, network with financial institutions and fund both equity and debt portions.

"Representation need to come in from companies and not from the state government directly. We will see if the state government can take a majority in the project or can have total stake," Khan said. The project also needs to be executed on the basis of international competitive bidding with a single contract scheme, he added.

PFC has also proposed floating the $1-billion India Power Fund on the lines of previous schemes such as Resurgent India Bonds and India Millennium Deposits, to finance generation and transmission projects in the country.

The fund could be a trust initially with contributions from PFC and other financial institutions. It could subsequently become a special purpose vehicle, Khan said. The power ministry is expected to take up the proposal with the finance ministry.