Canadian Investors Wary Of Power Sector Guarantees

The Indian power sector does not offer bankable guarantees for investments, according to some Canadian companies.

You can have all the discussions, verbal understandings, guarantees by the State Electricity Boards (SEBs), but these have to be approved by the investors, by the banks, and if they dont approve these guarantees, nothing can be done, said Garry Gordon, senior vice-president of Agra Monenco, a billion-dollar company that has installed several power projects in India.

We as investors need sovereign guarantees and they can only be provided by the Indian government or the Reserve Bank of India, he said.

Dudley Abraham, executive vice-president of the Canasia Power Corporation that is developing two 400 megawatt power projects in Uttar Pradesh, said, The state governments need to have a consultant with a big name to define the rules of the state, because without properly laid down rules they have nothing.

 

A number of agreements in the power sector guaranteed by the SEBs so far are held in escrow accounts payable under irrevocable letters of credit with the State Bank of India, Gordon explained.

A lot of people have concerns even at that level, he noted, and suggested that the state governments could guarantee that they will pay out of their allocations from the RBI. If that is done, there will be no problem for Canadian companies wishing to invest in the power sector.

The two officials later made presentations at a business seminar organised by the Ontario International Trade Corporation (OITC) for visiting Arunachal Pradesh Chief Minister Gegong Apang. Some half-a-dozen other companies from the infrastructure sector also made presentations.

Apang said Arunachal has a potential to generate as much as 50,000 mw of hydel power, almost 25 per cent of Indias total power needs.

However, he said, the state has an installed capacity of only 24mw and needs large foreign investments to develop its potential.

Apang assured Canadian companies that their investments would be guaranteed by the National Power Grid of India. He said he himself was willing to provide such guarantees on behalf of the state government.

Of the 84,000 km land area of the north-eastern state, 82 per cent is covered by forests. (We are) very conscious of our environment, said D C Misra, chief secretary of the state.