Despite the economic slowdown and cash crunch in the global markets, nine infrastructure projects worth over Rs 70,000 crore (Rs 700 billion) have achieved financial closure in the last three months. Domestic banks and financial institutions have funded over Rs 40,000 crore (Rs 400 billion) as the debt component for these projects.
The latest to join the list of projects that have achieved financial closure are two power projects -- 1,050 Mw GMR Kamalanga Energy of GMR Energy coming up at Dhenkanal in Orissa and the second phase 300 Mw Rosa power project in Uttar Pradesh promoted by Reliance Power.
Experts said financial closure for another Rs 100,000 crore (Rs 1,000 billion) worth of projects are likely to be achieved in this calendar year, mainly from the power and infrastructure sector.
"The liquidity situation in the country has improved after the stimulus offered by the central bank and the government. The projects that have achieved financial closure are fundamentally strong, with potential corporate back-up. Interest rates fell to 11.5-12.5 per cent from the September-October rate of above 14 per cent," said Sanjay Sethi, executive director and head, infrastructure Group, Kotak Investment Banking.
On Wednesday, GMR Energy announced that a debt component of Rs 3,405 crore (Rs 34.05 billion) for the Rs 4,540 crore (Rs 45.4 billion) Kamalanga project has been tied up with 13 banks, which include Andhra Bank, Bank of Baroda, Canara Bank, Central Bank of India, Corporation Bank, IDBI Bank, Indian Bank, IDFC, Punjab and Sind Bank, State Bank of India, State Bank of Mysore, UCO Bank and United Bank of India.
IDFC is the sole debt arranger and syndicator of the debt. The equity portion of Rs 1,135 crore (Rs 1.35 billion) is being tied up by GMR Energy and IDFC in the ratio of 80:20, said GMR Energy.
Meanwhile, sources familiar with the developments said Reliance Power has also achieved financial closure for the 300 Mw second phase of the Rosa power project coming up at Shahjahanpur in Uttar Pradesh. The Rs 3,000 (Rs 30 billion) crore project will have a debt component of about Rs 2,400 crore (Rs 24 billion).
A consortium of banks led by IDBI will lend to the project. Other major banks that have committed loans include Punjab National Bank, United Bank of India, Andhra Bank, Vijaya Bank, Karur Vysya Bank, Canara Bank, Corporation Bank, State Bank of Bikaner and Jaipur and LIC.
"The financing agreements with lenders are likely to be signed shortly," said sources in Reliance Power.
Reliance Power had achieved financial closure for its Rs 19,500 crore (Rs 195 billion) 4,000 Mw ultra mega power project coming up at Sasan in Madhya Pradesh in mid-April, in the largest debt funding for any infrastructure project in the country.
A few days ago, its group company Reliance Power Transmission also had announced financial closure for the Rs 1,385 crore (Rs 13.85 billion) Western Region System Strengthening Scheme transmission project in Maharashtra and Gujarat.
To facilitate private sector entry into power projects, the ministry of power has set up an institutional group to facilitate financial closure of private sector projects, said sources.
"This group has initiated a forum for engagement among promoters of various verticals which include power projects, banks, financial institutions and the ministry of power. Till date, the group has been successful in the closure of 12 power projects, with a target of fulfilling another 10 projects in the near future," said Rajiv Sethi, managing director, Fagioli PSC India, a facilitator company for power projects in India.
"More and more private sector groups are willing to invest in the power sector and lenders are bullish, as demand for power has not come down and remains at 15 per cent shortage during peak hours. This is likely to continue for some more years and the power sector has become a priority investment sector," said R V Shahi, former power secretary to the Government of India and chairman, Energy Infratech.
He said of the 78,000 Mw being added in the country, 11,000 Mw capacity has been commissioned and 65,000 Mw capacity are under construction. Financial closure for all these projects has been completed. The projects planned for the next five year plan are now in the process of achieving financial closure, he said.