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India Insure arranges hydrology cover for Malana Power

Our Bureau

Mumbai , July 16

`INDIA Insure', an insurance broking firm has arranged `Hydrology Risk' for the Malana Power Company.

The insurance cover has been facilitated by ICICI Lombard General Insurance Company and the policy has been placed for coverage of Rs 10 crore, said a press release.

Under the terms of agreement, should power generation at Malana fall below a specified percentage, the insurance company will pay the first Rs 10 crore towards loss of profit to the power company. This will help the power entity pay its dues to funding institutions among other expenses, the release said.

The country's first hydel power generating unit set up by an IPP, Malana Power has a generating capacity of 86 MW. At a competitive capital cost of Rs 3.75/MW, the unit will sell power at Rs 2.45/KW, which is one of the lowest generating costs, the release said.

"Projects dependent on the vagaries of weather are now increasingly relying on a special insurance cover - weather derivatives - for credit enhancement. With the crop insurance sector experiencing losses of over 400 per cent, the use of weather derivatives will go a long way in bringing down these losses. In the case of some hydro-power projects, lenders are looking for hydrology cover prior to financing these projects.

In the event of a shortfall in rainfall or snow melt; which affects the quantity of power generated, the insurance company will pay for the loss of profit. However, the key impediment in offering this cover is the non-availability of sufficient data, which has prohibited many covers to be reinsured," said the release quoting Mr V. Ramakrishna, Managing Director, India Insure Risk Management Services.

India Insure was instrumental in concluding the first reinsurance-driven hydrology cover in the country last year.

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