Power Finance Corp Sanctions First Loan To Pvt Power Producer
The public sector Power Finance Corporation (PFC) has sanctioned its first-ever loan to a private power producer following a green signal from the power ministry on its requests made since December 1995.
PFC board, which met here last week, cleared a term-loan of Rs 220 crore to 400 mw Maheshwar hydro-electric project (MHEP) in Madhya Pradesh at 19 per cent interest rate, according to sources.
The profit-making corporation had been seeking government permission for last year and a half in a bid to utilise the vast lendable funds at its disposal for private sector power projects as state electricity boards were found wanting in respect of PFC's lending norms.
The ministry had turned down the corporation's request in December 1995 when it made a presentation to enter private power financing business, but PFC persisted with its requests fearing that unutilised funds could eat into its profitability, the sources said.
When contacted, PFC spokesman and general manager of corporate planning Rajib Ranjan said the loan to MHEP, a company promoted by the S Kumar group, would include Rs 100 crore as part of a syndication arrangement with the Industrial Finance Corporation of India (IFCI) and a foreign currency direct loan of $34 million (Rs 120 crore).
Though this is one of the few hydro-power projects taken up by the private sector and the first to benefit from Power Finance Corporation, the corporation was considering loan applications of 42 other private producers, of which 18 are under active consideration, he added.
The power ministry's contention was that PFC's entry into private power financing would pre-empt the flow of funds to the cash-starved SEBs, which are passing through dire financial conditions.
On the other hand, PFC was finding most of the SEBs ineligible as per its operational and financial action plan (OFAP) conditions which envisages a three per cent rate of return from the state utilities, sources said.
Another problem with SEB financing was that some of these boards found eligible had an excess exposure or had achieved a significantly high level of borrowing, they added.
The corporation has set an internal lending target of Rs 2,200 crore for the current financial year against the declared Rs 1,500 crore target, they said adding that nearly 20 per cent of this might go the way of private producers of power.
With the relaxation of the OFAP norms, now a number of state utilities are found eligible for PFC loans, mainly in areas of renovation and modernisation for which the finance minister, P Chidambaram, has committed an additional grant of Rs 200 crore.