Satnam Singh, CMD Power Finance Corp

Makarand Gadgil 

Which new products are you launching?  

At a recent board meeting we sanctioned a loan of Rs 550 crore to APGenco which will allow them to finance their equity requirements for new projects.  The idea behind the new product is to help power producers to raise the equity capital for their new projects and meet the generation targets under the 11th and 12th five-year plans. 

We will securitise the earnings from the existing projects and make them upfront payments. The power producers will have to put these funds as their equity contribution in the projects. This new product will help to bridge the gap in equity financing which exists to some extent in the country. 

However, our major condition is that the power producer should have an existing running project. To begin with we will finance only state sector or central sector projects, but six months or a year down the line we will also be looking at financing the requirements of independent power producers. We are looking to sanction around Rs 1,000 crore in loans during the current financial year. 

There is talk of PFC picking up a stake in some power companies. Are you planning to set up a PE fund or special purpose vehicle (SPV) for this purpose? 

We have a separate group within our organisation which is exploring the possibility of equity financing. However, since there are no tax breaks at present for such venture capital funds which want to invest in the power sector, we are not looking at forming a separate fund or SPV for this purpose.  

What we are looking at is to (a) form a consortium of like-minded companies or financial institutions and apprise them about the viability of picking up equity in a power company, and (b) earn a fee for providing our services to these companies. 

PFC is setting up two new SPVs. What is their purpose? 

One SPV will take care of the needs of consortium financing, the other will exclusively deal with financing of projects in the renewable space. 

We are part of the Power Lenders Club which includes 18 banks, LIC and Hudco. They finance projects on the basis of the appraisal of the project that we make. Therefore, in any new power project where we are playing the role of lead financer, after appraising the project we will participate to whatever extent we can and ask other financial institutions to pitch in. They will then take a decision based on our appraisal of the project. 

Renewable energy is a new area of growth for us. Last year we sanctioned loans of Rs 560 crore, this year we are looking to sanction loans of more than Rs 600 crore. In such a scenario, it makes sense for us to create a separate SPV for this purpose. 

PFC is also looking at venturing into the financing of allied areas such as coal mining and equipment manufacturing. Have you identified any projects for financing? Any targets for sanctioning such loans? 

We will be sanctioning our first loan in this category in a month or two. Right now we are considering five to six such proposals, but no target has been set. For some time to come it will be a negligible part of our portfolio, which is around Rs 1.38 trillion. 

When are you expecting to give out a request for qualification (RFQ) for the three new ultra mega power projects (UMPPs) and complete the process of handing over the SPVs to the successful bidders? 

The RFQ for Cheyyur in Tamil Nadu, Bedabahal in Orissa and Akaltara in Chhattisgarh will be given by the last quarter of this financial year. After RFQs are given it takes around nine months to complete the process, so by the second or third quarter of next year the SPVs will be handed over to the successful bidders. 

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