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Power Lenders Club finalises norms for funding projects

Anil Sasi

The club
The lenders' club is formed by LIC, PFC and 10 banks.
PFC will carry out initial project appraisal.
The consortium will be a one-stop shop for all funding requirements of the power sector.

New Delhi , March 6

In a move that could greatly streamline funding of power sector projects, a `Power Lenders Club', being formed by state-owned Life Insurance Corporation (LIC), Power Finance Corporation (PFC) and 10 banks, has finalised common loan documents and appraisal mechanisms for financing power projects.

According to Government officials, PFC will carry out the initial project appraisals and also syndicate the entire debt through the `Power Lenders Club', which promises to leverage collective financial muscle and change the way financing of power projects in the country is happening currently.

The move is aimed at ensuring faster processing and decision-making, streamlining of entire process of appraisal, sanction and disbursement and a common approach by all institutions when the funding for a project is being considered, instead of the individual funding by banks and institutions happening at present.

"Documents pertaining to methodology and common loan agreement have already been circulated to all members. The consortium will be operationalised soon," an official involved in the exercise said.

The consortium promises a one-stop shop for all funding requirements of the power sector, including for reform projects across States.

"Since financing of power sector projects generally happens through syndicates formed by a number of lenders, the consortium approach offered by the `Club' would provide a comprehensive solution to the debt requirement of these projects without the developer having to queue up before a number of lenders to arrange for the funds. Also, the scale of funding possible through the consortium is much higher," an official said.

The coming together of the lending institutions is also significant since the Government's ambitious `ultra-mega power projects', involving construction of five power projects with capacities of up to of 4,000 MW each, is slated to take off shortly.

With overall projected investments of around Rs 75,000 crore, of which the debt component is expected to be around 70 per cent, the `Club' stands in good stead to tap the increased funding opportunities coming up, officials said.

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