19957971 Sources of Fund in Indian Power Sector

8/6/2019 19957971 Sources of Fund in Indian Power Sector

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OBJECTIVE

Each research study has its own specific purpose. It is like to discover to Question through theapplication of scientific procedure. But the main aim of our research to find out the truth that ishidden and which has not been discovered as yet. My research study has two objectives:-

PRIMARY OBJECTIVE: -

By this project I try to find out various sources of who are directly or Indirectly Financing inIndian Power sector. Like which are the organization give fund what are the types of fundare given to the organization is try to find out by this project.

BROAD OBJECTIVES: -

The various schemes given by the lending organization to the power sector company.

To find out what amount of fund come by the organization from their own source

To analyze the process of apprizing of loan by lender

To find out what amount of fund come from institutional investor.

Try to find out what are the stander rates for financial ratio of the Power Company.

Try to find out what is the financial position of the various company compare to thestander.

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METHODOLOGY

For fulfilling the objective of this project I fellow qualitative and quantitative analysis.

Qualitative Research :- In my research I go through various lending company who giving loan to this sector. So this

based on all qualitative data whatever I get from Internet, various Journal and Interview taken personally. In short, in Qualitative research I know what is the behavior of the organization for lending the money. Quantitative research :- Quantitative research is based on the measurement of quantity or amount. It is applicable to

phenomena that can be expressed in terms of quantity. So in my project by using the numericaldata I try to find out the financial position of power Sector Company.

I nformation Sources :-For collecting primary data I conducted a designed questionnaire method to collect dataregarding appraisal process and Fund raising process. For that I collect three person interviews.

For secondary data I use various books, Newspaper, Journal, Companys website, and one paiddatabases website.

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COMPANY PROFILE

Abir Infrastructure Pvt Ltd is one of the fastest growing infrastructure developers inIndia dealing in construction and infrastructure projects. It was incorporated in 2005. Previouslyits name is Abir construction Pvt Ltd. This company is specialized in Engineering andConstruction.

Abir Infrastructure Pvt Ltd is actively engaged in the construction of Civil and Structuralworks for Thermal power project as well as Hydro Power projects including Roads, Bridges,Head Race Tunnels, Dams, Underground Power Houses and other infrastructure works. Abir currently engage in the execution of Hydro Electric Power projects in Himachal Pradesh,Sikkim, Arunachal Pradesh and Meghalaya, and Thermal Power projects in Andhra Pradesh andChhattisgarh.

Abir is a team of more than 1000 skilled and qualified people spread across multiple Project siteas well as head office. It is the dedication and commitment of our multi-talented and skilledmanpower which has resulted in making Abir one of the most preferred companies in theinfrastructure sector.

Vision:- To be among the top five Infrastructure companies of the world Mission:- To provide construction and contract services for executing infrastructure

projects efficiently, through optimization of time and cost Project: - The Major project of Abir Infrastructure Pvt.Ltd. are as fellow.

Sl.No Name & Type of the Project Location

1. Teesta-III Hydro Electric Project Sikkim, India2. Malana-II Hydro Electric Project Himachal Pradesh, India

3. Sainj Hydro Electric Project Himachal Pradesh, India

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4. Patikari Hydro Electric Project Himachal Pradesh, India

5. Kynshi I Hydro Electric Projects Chattisghar, India

6. Demwe Hydro Electric Project Arunachal Pradesh,India

7. Emra Hydro Electric Project (I&II) Arunachal Pradesh,India

8. Bhavanapadu Thermal power Project Andhra Pradesh, India

9. Yamne Hydro Electric Project Meghalaya, India

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INDIAN POWER SECTOR

Power is one of the prime movers of economic development. The level of availability andaccessibility of affordable and quality power is also one of the main determinants of the quality of life. In India the process of electrification commenced almost with the developed world, in the 1880,with the establishment of a small hydroelectric power station in Darjeeling. However, commercial

production and distribution started in 1889, in Kolkata. In the year 1947, the country had a power generating capacity of 1,362 MW. Generation and distribution of electrical power was carried out

primarily by private utility companies such as Calcutta Electric. Power was available only in a fewurban centers; rural areas and villages did not have electricity. After 1947, all new power generation,transmission and distribution in the rural sector and the urban centers came under the purview of State and Central government agencies. State Electricity Boards (SEBs) were formed in all the states.

Legal provisions to support and regulate the sector were put in place through the IndianElectricity Act, 1910. Shortly after independence, a second Act - The Electricity (Supply) Act, 1948was formulated, paving the way for establishing Electricity Boards in the states of the Union.

In 1960s and 70s, enormous impetus was given for the expansion of distribution of electricityin rural areas. Since then, almost all new investment in power generation, transmission anddistribution has been made in the public sector. Most of the private players were bought out by stateelectricity boards.

The power Sector has been receiving adequate priority ever since the process of planneddevelopment began in 1950. The Power Sector has been getting 18-20% of the total Public Sector outlay in initial plan periods. Remarkable growth and progress have led to extensive use of electricityin all the sectors of economy in the successive five years plans. Over the years the installed capacityof Power Plants has increased to 100,000 MW on March, 2000 from meagre 1362mw in 1947.Similarly, the electricity generation increased from about 5.1 billion units to 420 Billion units. The

per capita consumption of electricity in the country also increased from 15 kWh in 1950 to about 338kWh in 1997-98, which is about 23 times. In the field of Rural Electrification country has made atremendous progress. About 85% of the villages have been electrified except far-flung areas in NorthEastern states, where it is difficult to extend the grid supply. And now India has become sixth largest

producer and consumer of electricity in the world equaling the capacities of UK and Francecombined. The number of consumers connected to the Indian power grid exceeds is 75 million.

However, the achievements of India's power sector growth looks phony on the face of hugegaps in supply and demand on one side and antediluvian generation and distribution system on theverge of collapse having plagued by inefficiencies, mismanagement, political interference andcorruption for decades, on the other. Indian power sector is at the cross road today. A paradigm shiftis in escapable- for better or may be for worse.

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SWOT ANALYSIS OF INDIAN POWER SECTOR :-

Strength :- Developing Economy: - After Liberalization, Privatization & Globalization Indian Economy

goes up. The GDP rate is also very high. For the continuation of the system and developingthe system huge power is needed. But presently power scenario is 1, 48,265.41 M.W. So coupup with that, Economic development Power sector is need.

Government Decisions: - India Government also directly and indirectly help Power sector.The recent price increases, Tax benefits, subsidies on LPG etc provided to the power sector

. Weakness :-

Crude prices: - For running Gas based Thermal Power plant, they gets gas from variouscompanies like ONGC, Reliance Petroleum Ltd etc. But this company brings crude foreign.In India nearly 70% of crude requirements are fulfilled by imports and this figure is likely toincrease going forward. Crude prices have breached the $45 barrier again and are likely toremain at around $40 per barrel range. This is the main Problem for Power sector.

Lack of freedom: - Although the government has decided to provide autonomy to power sector companies to increase power potential in the country, though continue to remain under the government controlled price mechanism. For that the power company do not gets anyfreedom in this sector.

Opportunity:- Natural Gas: - Natural gas has the potential to be the fuel of the future with demand

outpacing supply by more than two times. Such high scarcity of natural gas provides a bigopportunity for oil companies. The below mentioned table indicates the allocation to thevarious core sectors and the shortage faced by them, thereby giving an idea of the potentialfor growth.

Threats :- Competition: - Now days Public as well as Private sector also come in the power sector. By

this the power company faces a huge competition. For that general production process getshampered.

Continuing government interference : - For developing any power project state and centralgovernment create many hazardous situations. For planning, procurement, and processgovernment create various norms and rules. For this process become hampered.

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For running any business money is necessary, without that any operation cannot be going. Sowe can say for any kind of business finance can be treated as life blood of the business. For in Power sector finance i.e. is a very important thing. As we know India is the 3 rd biggest power generatedcountry among ASIA but till now a days power supply is under crisis. In every year India face a

huge deficit in demand - Supply of Power. Till now there are many villages that are to be electrified.For that we need more power generation station. It can be Thermal Power; can be Hydro Power and

Nuclear Power. As par new police of Government of India Public as well as Private both the sector can be setup their power station.

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Under public sector some main organization are:-

National Thermal power corporation Ltd. (NTPC Ltd.)

National Hydroelectric Power Corporation Ltd. (NHPC Ltd.)

There are some organizations which are established under private sector. Like

Reliance Power

Tata Power

Jaypee hydro etc.

Apart from these two there are some organizations which are established under public-privatecollaboration, like:-

Satluj Jal Vidyut Nigam Ltd.

Tehri Hydro Development Co. Ltd.

Apart from this organization there are some organizations which are help to supply the power in all over the country. This are

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http://www.reliancepower.co.in/html/index.html


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a. Power Grid Corporation

b. Power trading corporation.

c. Indian Energy Exchange Ltd.

By this all of this organization is try to develop more power generation and itsdistribution in India. For execute this type project any organization need finance and for that inIndia basically two types of Finance is available.

1. DEBT FINANCE.2. EQUITY FINANCE.

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DEBT FINANCE :- Its means that When a firm raises money for capital or capitalexpenditures by selling bonds, bills, to individual or institutional investors, or Directlytaking loan from any Individual or institution is called debt financing. Among the DebtFinance there are several methods like, Selling Debenture, Bonds and taking Term Loan,project Finance etc. For the Term Loan, Project Finance there is various type of organization for who is providing financing a project. But in the broad sense we cancategorize this in mainly three head.

a. Term lending Institution This institute are providing long term loan for a project.b. Banking Institution - These are generally Public and Private Bank.

c. Other Financing Institution - This are generally Non-banking financial Institute andSome Foreign Institute.

Under term lending institution Power Finance Corporation (PFC) Rural Electrification corporation (REC) India Infrastructure Finance corporation (IIFCL) Indian renewal energy development agency limited (IREDA) Infrastructure Development Finance corporation (IDFC) PTC India Financial Services Ltd

Banking Institution:-

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Andhra Bank IDBI Bank State Bank of India

Other Financing Institution: - Asian Development Bank GE energy financial services SREI Financial services World Bank

P OWER FINANCE CORPORATION (PFC)

About The Organization :- Power Finance Corporation was set up in July 1986 as aFinancial Institution (FI) dedicated to Power Sector financing and committed to the integrateddevelopment of the power and associated sectors. The Corporation was notified as a PublicFinancial Institution in 1990 under Companies Act, 1956. The Corporation was registered as a

Non Banking Financial Company by RBI and has been conferred with the status of Nav-RatnaPSU by Govt. of India on 22nd June, 2007. Product & Service : - PFC is providing large range of Financial Products and Services like

Project Term Loan, Lease Financing, Direct Discounting of Bills, Short Term Loan, ConsultancyServices etc. for various Power projects in Generation, Transmission, and Distribution sector as

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well as for Renovation & Modernization of existing power projects. But in broad head generallytwo types of product is available

I. Fund based ProductII. Non Fund based Product.

Among Fund based product are those by which PFC give various type of Loan to various

organization. The main fund based products are:-1. Project term loan2. Short term loan3. Medium short term loan to equipment manufacturers-4. Lease finance scheme5. Debt refinancing scheme6. Project rupee bridge loan scheme7. Mini short term loan

Now the all Fund Based Products of power Finance Corporation are describe in details.

P roject Term L oan

Purpose : - To provide finance to all types of projects in state & private sector like Power generation , Power transmission, Power distribution, renovation & modernization, updating,environment up gradation, metering, etc.

Eligible entities : - The entities engaged in power generation, power transmission, power trading, power distribution or any combination of these activities including captive / co-gen power producers.

Extent of assistance :- Central / State sector entities - Up to 70% of the project cost Reforming State sector entities - Up to 80% of the cost of project. Private sector entities - Up to 50% of the project cost.

Interest rates & Other charges :- Interest rates as notified by the Corporation from time to time. Special interest rates are alsoavailable for loans exceeding Rs. 700 cr. for generation projects in state sector and Rs. 500 cr.

in private Sector. Interest rates prevailing on the date of disbursement(s) shall be applicable. Incentive / rebate available for timely payment of dues for state/ central sector utilities.

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Penal interest payable on default-payments. Upfront fees as may be applicable for respective borrowers from time to time. Processing fee, Lead fee & facility Agent fee for private sector entities as applicable from

time to time. Disbursement mechanism : - Disbursement will be made, against BILLs, as per the

Disbursement Schedule submitted by the borrower. In case of Small Loans (below Rs. 20 cr.),

simplified disbursement procedure is applicable. In the case of private sector borrower,disbursement is made through Trust and Retention Account mechanism. Interest payment : - Interest is to be paid quarterly, on standard due dates. Repayment :- Repayment is to be made in maximum years of

Type of Projects 3 Years

Reset Clause

10 Years

ResetClause

PrivateSector

Hydro Generation Project 20 15 12

Thermal Generation Project 15 15 12

Studies, Consultancy,

Training, R&D.

5 5 5

All other Projects 15 12 10

Security requirements :- State / Central government or bank guarantee or charge on assets, for state and central sector

entities, while charge on project assets for others. Letter of Credit or Tripartite Escrow Agreement amongst the borrower, the bank and PFC for

state and central sector entities while Trust and Retention Account mechanism for others. Corporate and / or personal guarantee of the promoters for private sector, if the outcome of appraisal establishes a requirement for the same.

Other securities, as may be necessary.

S hort T erm L oan

Purpose : - To provide finance to the existing borrowers in the State / Central Sector to meettheir immediate requirement of funds. The Rupee loan under the scheme shall be provided for

purchase of fuel for power plant, purchase of consumables, essential spares, emergency procurement for generation plant and T&D network in the nature of repair & maintenance

work, purchase of power, against receivables of transmission entities on account of wheelingcharges. Eligible entities :- All the existing state / central sector borrowers (who have outstanding

amounts under long term loans-project finance) and who are not declared defaulter by PFC. Extent of assistance : - Rs.150 crores to Rs.300 crores depending upon reforming status of

the borrowing entities as per policy applicable.

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Tenor : - The loan under the scheme shall not exceed one year from the date of Disbursement. Interest rate & other charges : - As notified by the Corporation from time to time. Repayment period :-

Option-I : Loan will be sanctioned for a tenor of 30 days to 180 days in multiples of 30days with option to roll over.

Option-II: Loan will be sanctioned for a tenor up to one year. Loan shall be repaid

through EMI. First EMI shall commence after two months. Security :- Tripartite Escrow account agreement in the prescribed format where the sanctioned amount is

up to 50% of sanction limit. Where sanctioned amount is more than 50% of sanction limit in addition to escrow account,

charge on assets / govt. guarantee will also be required. Validity of loan : - The entire loan amount shall be drawn within 45 days from the date of

sanction.

Debt Refinancing Scheme Purpose :- This scheme envisages to provide financial assistance to the borrowers, who have

borrowed funds from other lending institution(s) at a higher rate of interest and now wish toreplace with lower interest rate with the assistance of PFC. By this scheme, the borrowers mayreduce their cost of borrowing.

Eligible entities: - Commercial entities engaged in generation, transmission, distributionof power or any combination of these activities including captive power producers andinfrastructure projects with backward / forward linkage to power projects.

Extent of assistance:-

Central / State sector Up to 70% of the project

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entities cost

Private sector

Thermal generationprojects

Up to 20% of the projectcost

Hydro generation projects Up to 25% of the projectcost

Other projects Up to 50% of the projectcost

Interest Rate : - As notified from time to time for project term loans. Disbursement mechanism: - Disbursement will be made in lump sum to

the bank/lending agency whose dues are prepaid.

Repayment :- Repayment is to be made in maximum years of :-

Type of Projects

3 Years

ResetClause

10 Years

ResetClause

PrivateSector

HydroGenerationProject

20 15 12

Thermal

GenerationProject

15 15 12

Studies,Consultancy,

Training, R&D,S&I,Computerization,Meters

5 5 5

All otherProjects

15 12 10

Security requirements:-

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Letter of Credit or Tripartite Escrow Agreement amongst the borrower,the bank and PFC for state and central sector entities while Trust andRetention mechanism for others.

State / Central Government / Bank guarantee or charge on projectassets, for state and central sector entities, while charge on projectassets for others.

Corporate and / or personal guarantee of the promoters for privatesector, if the outcome of appraisal establishes a requirement for thesame.

Pledge of shares, assignment of contracts .

Rural E lectrification Corporation (REC)

Ob jective of REC :-The main objective of Rural Electrification Corporation is to finance and promote rural electrification projects all over the country. It provides financial assistance toState Electricity Boards, State Government Departments and Rural Electric Cooperatives for rural electrification projects as are sponsored by them. REC provides loan assistance to StatePower Utilities for investments in rural electrification schemes through its Corporate Officelocated at New Delhi and 17 field units (Project Offices), which are located in most of theStates. The Project Offices in the States coordinate the program of RECs financing with theconcerned State Power Utilities and facilitate in formulation of schemes, loan sanction anddisbursement and implementation of schemes by the concerned State Power Utilities.

Product & Service : - REC offers various types of debt financing to Public & Private sector.These are like

Loan for Government/Public Sector/SEB Loan for Private IPP's Loan for Short Term Loan Loan for Debt Refinancing

The role of Transmission & Distribution Division is to :- To assess financial requirements of Power Utilities in the country in T&D sector To appraise and sanction T&D Schemes posed to REC for financing. To monitor T&D Schemes (Physical as well as Financial monitoring) To evaluate impact of T&D schemes The T&D programmed has so far been the single major contributor to the business of

REC.

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Catego ry of schemes Financed under Transmission &Distribution : - In context of Transmission& Distribution of Power there are several schemes of Financing by the Rural ElectrificationCorporation. Now we are discussing these schemes.

Now we will discuss some schemes of financing for Transmission & Distribution of power indetails.

Distribution schemes

Transmission Schemes System Improvement : To overcome the system deficiencies and to improve the quality

and reliability of power supply, REC finances System Improvement schemes, based onsystem studies of an electrical distribution network considering present status of systemcapacities, connected demand, voltage profiles and level of losses, together with scope for future load growths. System deficiencies and weaknesses are identified and suitable solutionsidentified. This broadly includes creation of new sub-stations and feeders, augmentation of existing capacities of sub-stations and feeders, installation of capacitors, provision of efficientand tampers proof meters.

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Sl.No Category Purpose

(i) Project

system Improvement

To strengthen and improve the sub transmissionand Distribution system in the designated area.

(ii) Meters, Transformers,etc

For procurement and installation of meters,transformers etc.

S.No Category Purpose

(i) Project system

Improvement: P:SI

For evacuation of power from new generating stationsand to strengthen/improve the existing transmissionsystem in the

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Intensive Electrification : The scheme for intensive electrification of electrified villageshas been termed as Projects Intensive Electrification. Schemes under this activity mainly aimat intensive electrification of already electrified villages. The basic purpose is to cover intensive load development for providing connections to rural consumers in alreadyelectrified villages equipment and technologies which help in energy savings and improvingthe quality of power supply. This results in the supply of better quality and more reliable

power to the consumers and increased revenue to the Power Utilities. Pump set Energization : REC started this program to provide funds for schemes for

energizing of pump sets, in order to facilitate agriculture. Thus the schemes are termed asSpecial Project Agriculture (SPA). Since the start of the program, till March 07, loanassistance of Rs. 5616 crore has been sanctioned under this program.

A part from that REC give some Loan for development of Electrification.

CATEGORY PURPOSE

Project Household Electrification Accelerated Electrification of one Lakh villages and one crorehouseholds

Project Village Electrification Aims at Electrification of unelectrified villages in a selecteddesignated area

Project Hamlet Electrification Aims at Electrification of unelectrified hamlets by release of Household, Street Light and other connections

Project Intensive Electrification To cover intensive load development for providing connectionsto rural consumers in already electrified areas

Project Pump sets Aims at energization of pump sets

Project system Improvement To strengthen and improve the transmission, sub transmissionand distribution system in the designated area

Project Comprehensive System ImprovementTo meet system inadequacy of entire systemfrom LT Distribution to Sub transmission andtransmission level of a given geographical area

Short Term Loan

To provide finance to the Power Utilities andState Governments to meet their workingcapital requirement for different purposes, suchas purchase of fuel for power plant, purchase of

power, purchase of material and minor equipment, system and network maintenanceincluding transformer repairs, etc.

Debt Refinancing The Scheme aims to facilitate reduction of thecost of borrowings of State Power

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Utilities/highly rated private power utilities byrepaying their high cost term loans raised fromother Banks/Financial Institutions for eligible

projects/schemes.

Financing Equipment manufacturers

To provide Short term Loan/Medium term loan

to the manufacturers of Power/Electricalmaterial for power project.

India Infrastructure Finance CompanyLimited (IIFCL)

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About the Organization :- India Infrastructure Finance Company Ltd. (IIFCL) wasincorporated on January 5, 2006, under the Companies Act 1956, as a wholly Governmentowned Company with an authorized capital of Rs. 2000 crore and paid-up capital of Rs. 1000crore. Besides, the resource-raising program of the Company would have sovereign support,wherever required.

Business Performance (as on March 2008) :-

Within a short span of its inception, the company has expanded its activities and hassanctioned financial assistance of Rs 183.80 billion to 86 projects involving a total projectcost of Rs1435.11 billion. Out of the 86 projects which have been sanctioned, 71 projectshave achieved financial closure and documents have been executed. This 86 assisted projectsare spread across 19 states of the country.

Infrastructure Projects Scheme Funding of IIFCL : - The IIFCL shall be funded through long-term debt raised from the open

market or foreign currency debt. Eligibility : - The IIFCL shall finance only commercially viable projects. In order to be eligible

for funding under this Scheme, a project shall meet the following criteria:-A. The project shall be implemented by:

A Public Sector Company;

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A Private Sector Company or Public-Private Partnership initiative.A. The project should be from one of the following sectors:

Road and bridges, railways, seaports, airports, inland waterways and other transportation projects;

Power generation, transmission, and distribution; Urban transport, water supply, sewage, solid waste management and other physical

infrastructure in urban areas; Infrastructure projects in special Economic Zones.

Lending Terms :- The IIFCL may fund viable infrastructure projects through the followingmethods:-

Long Term Debt; Midterm project Finance for 10 years: Any other mode approved by Government from time to time.

Other Condition :- The total lending by the IIFCL to any Project Company shall not exceed 55% of the Total

Project cost. Loans will be disbursed in proportion to debt disbursements from financial institutions. The rate of interest charged by IIFCL shall be such as to cover all funding costs including

administrative costs and guarantee fee, paid by IIFCL. The charge on project assets shall be equal with project debt. The IIFCL, the Lead Bank and the Project Company shall enter into a Tripartite

Agreement for the purposes of this scheme. Recovery Process : - Recovery of loans advanced by IIFCL shall be the responsibility of the

Lead Bank. Recovery of IIFCL loans shall be equal to with project debt of the Lead Bank and FIconsortium has been recovered.

Review of the Scheme : - The Scheme may be reviewed by the Government at the end of 5 years

or earlier if required.

IIFCLs Refinance Scheme

Objective: - The primary objective of IIFCLs refinance scheme is to facilitate the flow of fundsin an increasing manner for the development of infrastructure in the country. Under the scheme

IIFCL will provide refinance for term loans sanctioned by Banks for only new commercially

viable projects in road and port sectors.

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Eligibility : - The main characteristics of the scheme are:

1. Refinance would be provided to Banks for new commercially viable infrastructure

projects.

2. Refinance would be made available to new projects only for which bids are submitted on

or after 31.01.2009.3. Refinance would be made available to those new projects which are approved by Public

Private Partnership Approval Committee (PPPAC) under the guidelines for Formulation,

Appraisal and Approval of PPP Projects and/or by the Empowered Institution under the

guidelines for Financial Support to PPP in infrastructure.

Extent of Refinance : - IIFCL shall provide refinance upto 60% of the loans provided by the

Banks to infrastructure projects in the roads and port sectors.

Rate of Interest : - The IIFCL rate of refinance at present would be 7.85% p.a.

Tenor of Refinance : - Tenor of refinance shall be 10 years.

Repayment : - Total repayment of refinance amount within a period of 10 years.

Other Terms:-

1. No Upfront fee to be levied.

2. Prepayment of refinance instalment is permitted only in cases where the borrowing units have

prepaid the corresponding loan instalments.

3. Time limit for refinance is within three months from the date of each disbursement.

4. Failure to service interest or debt would attract the provisions of the General Agreement,which involves levy of additional interest.

Indian Renewable Energy DevelopmentAgency Ltd

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About the Organization :- Indian Renewable Energy Development Agency Limited(IREDA) was established on 11th March, 1987 as a Public limited Government Companyunder the Companies Act, 1956 and it promotes, develops and extends financial assistance for Renewable Energy and Energy Efficiency/Conservation Projects. IREDA has been notified asa Public Financial Institution under section 4 A of the Companies Act, 1956 andregistered as Non-Banking Financial Company (NFBC) with Reserve Bank of India (RBI).

SECTORS ELIGIBLE FOR ASSISTANCE :- Small Hydro Power Medium & Large Hydro Projects above 25 MW Wind Energy Bio-Energy Solar Energy Energy Efficiency & Energy Conservation Bio-fuel / Alternate Fuel New & Emerging Technologies Developmental Activities/ New InitiativesThere are several schemes for financing by IREDA. These are Project Financing Equipment Financing Energy Centers Renewable Energy / Energy Efficiency Umbrella Financing Non-conventional Energy Technology Commercial Fund Scheme Additional / Bridge Loan against SDF Loan.

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Project Financing :- This schemes is for Hydro Energy

.

Renewable Energy-Energy Efficiency Umbrella Financing

Background: - IREDA has launched the Renewable Energy-Energy EfficiencyUmbrella Financing Scheme for those organizations who have good existing

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Sector Interest Rate(%) p.a

MaximumRepaymentPeriod[Years]

MinimumPromotersContribution(%)

TermLoan/lending

Norms of IREDA

Remarks

(i) Small Hydro upto25 MW Capacity

12.15 to 13.15 10 30 Up to 70 % of total projectcost

(ii) Hydro above 25MW ( in consortium /co financing withother Banks/FIs)

12.15 to 13.15 15 30 Up to 50 % of total projectcost

IREDA willfinance above 25MW inconsortium / co-financing withother FIs/Banksand can alsotake up positionof leadinstitution.


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network to serve individual/retail customers who do not full fill IREDAs legal eligibilitycriteria and are scattered over large rural/semi-urban areas.

Objectives :-1. To supplement IREDAs current lending operations by spreading the customers/user base

through the development of an appropriate Micro financing Network.

2. To facilitate the Micro Lending capabilities of IREDA. Eligibility :- State Financial Corporations (SFCs), Industrial Development Corporations

(IDCs), Technical Consultancy Organizations (TCOs), Non Banking Financing Companies(NBFCs), State Nodal Agencies (SNAs), Business Development Associates (BDAs) ,Scheduled banks and Non-Governmental Organizations (NGOs) which are otherwise legallyeligible to borrow from IREDA and full fill the other eligibility norms detailed in Financingguidelines.

Lending Terms And Conditions :-Line of credit : Minimum Rs. 25.00 lakhs and maximum Rs. 1 crore.The financing norms applicable for this scheme are shown in the table given below

Sector Interest

Rate*(%)

Repayment

period(Years)

Moratorium

(Max yrs)

Lending Norms of IREDA

NRSE &Energyefficiency

10.00 ( for line of creditmobilizationadvance)

10 2 50% of total sanctioned Line of Credit as Mobilization advance

balances 50% after evidence of proper utilization of mobilization in advance.

Procedure For Application: - The eligible applicant will submit an application in the prescribed format of IREDA along with business plan and other enclosures. Applications for

a line of credit will be appraised based upon the criteria prescribed by IREDA. IREDA willreview application and sanction the line of credit based on the qualification criteria: or rejectthe application, if not found suitable.

Security:-1. Bank Guarantee / Pledge of FDR from a Scheduled Commercial Bank 2. State Government Guarantee.3. Unconditional and irrevocable guarantee of All India Financial Institution with AAA or

equivalent rating. Disbursement : - IREDA will disburse 50% of the line of credit as Mobilization advance after

signing of Loan Agreement and creation of security. Concessions Provisions: - Front end Fee, Inspection charges, Legal charges (other than

incurred for recovery), expenditure on Nominee Directors are not applicable to this scheme. Special Conditions :- If the borrower conducts no business (submits no evidence of

utilization of mobilization advance to IREDA) within a period of 12 months from the date of disbursement of mobilization advance, then the line of credit sanctioned would automatically

be cancelled. In that event, Mobilization advance drawn from IREDA along with interestshall be refunded within 30 days of expiry of said one year.

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Infrastructure Development FinanceCompany

IDFC Incorporated on 1997 in Chennai. It establish under recommendation of the expertgroup on commercialization of infrastructure project. Its basically financed in the infra structure

project in the India. Up to 31 st march2007 IDFC already financed 332 projects which can beaggregating Rs 220400 million.

For developing the Infrastructure in India IDFC give some focus area for developing there project.

Energy/Power sector Transportation

Communication Sector Urban & Rural Infrastructure Development.

Among them IDFC give a priority to Power sector. They believe In India there are lots of opportunity in the power sector. By utilize that opportunity the government of India want to develop

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100,000 MW by 2012.Out of which of 23,000 MW would be in the private sector. For boost up thissector, especially the private sector, IDFC has several fund based products for developing the project.These are like:-

Project Finance Senior Debt Mezzanine Debt Private equity Project Finance : - In India for developing any large project huge finance is needed. For the

supply the fund in this type of project term lending institute is establish. In the IDFC for project financing loan is given. In this scheme IDFC give long term loan to the financingcompany for fulfillment of the project. In this regard IDFC give term loan for anyPower/Energy company. This loan is provided Public as well as Private sector todevelopment a project. In this scheme loan is provided for 10-12 on a long term basis. Therate of interest is varied time to time. Apart from the financial help in this scheme IDFC also

provided advice to this company.

Senior Debt : - Senior debt is the largest components in their financial portfolio. According tothem more than 80% loan given by them is provided under this scheme. The senior debt schemeis a squired loan, given by pledge for buying or accruing fixed assets for any project. The rate of Interest of the senior loan scheme is fixed rate basis. Its also re evaluated after every five year and that time the rate can be change. The loan taker can get a opportunity to raised the loan timeto time up to a certain extend at that time .

Mezzanine Debt : - Basically It is an equity-based options, Mezzanine debt is actually closer toequity .In order to re financing in a project IDFC using this loan scheme. This is the scheme bythe when IDFC giving loan to any organization who are already financed ,that time for refinancing IDFC take some equity of that company and as hypothecated and give them the loan.The risk involvement on this loan is very high. In IDFC this loan only provided to the Senior Debt holder.

Private E quity: - To bust up the private sector in this sector IDFC lunge Private equity. By thisoption IDFC underwrite of equity share of any company. Its a type of equity financing. IDFC byits subsidiary organization that is Investment development fund and IDFC PE ltd sponsor theinvestor to raising fund. This raised Rs 2740 Core up to 31 st March, 2007 .Apart fromunderwriting the share now days IDFC also directly take part in the Initial Public offering (IPOs)for raising the fund by the company.

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PTC India Financial Services Ltd

PTC India Financial Services Ltd (PFS) is promoted by PTC India Ltd (PTC) as a special purpose investment vehicle to provide total financial services to power projects in generation,transmission, distribution. PFS also provides Fun based as well as Non-fund based financial servicesfor projects growth and development. It is incorporated under the Companies Act 1956, andregistered with RBI as a NBFC.

The vision of PTC India Financial Services Ltd (PFS) is to be the most preferred financialservices partner in the entire energy value chain. PFS strongly believes in partnering and forging

strong relationship with credible stake holders to provide complete financial services for all links inthe energy value chain.

In its pursuit to be the most preferred financial services partner in energy sector, PFS offers awide range of financial products and services structured according to the nature of project, profile of

promoters, risk analysis and the specific requirement of the project. PFS offers financial assistance to projects in this sector is mainly falls into two categories.

Lending Equity Investments

Lendin g: - PFS offers debt assistance to projects subject upto certain limits. PFS structure thedebt assistance taking into consideration factors like needs of the borrowing entity, the marketconditions, regulatory requirements, risks and rewards from the projects. PFS offers thefollowing debt instruments:

Term Loans Bridge Loans Suppliers Credit Bill Discounting

PFS also considers mezzanine funding debt against promoters contribution in equity or in

any other form depending upon the requirements of the project

PFS extends finance assistance to all kinds of borrowing entities in the public as well as private sector in the entire energy value chain. However, the priority of PFS would be private sector,followed by Joint sector/ Government sector projects.

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The interest rate to be charged by PFS shall take into account the cost of funds of PFS, rates being charged by other institutions/bank, and condition of the financial market While providing for areasonable margin, PFS may provide for charging differential interest rate form the borrowersdepending upon the type of project, and grading based on the entity appraisal.

Equity Investments : - The equity investment in a project is focused on the side of promoter.This fund is given by after judging the track record, good growth prospects and clearly definedexit routes from the project. Investment horizon tends to focus on the short to medium term. Wealso provide the last mile equity to power projects as and when required depending upon the

project viability, its progress and our investment guidelines. Investment decision depends uponthe valuation offered by the project. For the purpose PFS undertakes requisite due-diligence andassessment of the techno-economic viability of the proposal. FS sees value in small andupcoming developers with promise and viable project and help them by sharing risk and addingcredibility by participation in equity.

The nature and the extent of participation in equity may vary from project to project. PFS would

not normally take stake below 10% in equity of any project. The participation in equity can also bestructured in the form of joint venture with PFS taking the role of a strategic investor or a financial

partner.

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Among the banking institution the banks which provided finance are as fellow.

ANDHRA BANK

About the Organization : - Andhra Bank was founded by Dr.Bhogaraju PattabhiSitaramayya. The Bank was registered on 20th November 1923 and commenced business on28th November 1923 with a paid up capital of Rs 1.00 lakh and an authorized capital of Rs10.00 lakh. One of the largest banking networks in India with more than 1400 branches inIndia.

Product &services :- In Andhra there are various type of product for financing for long termfinancing. Andhra bank provided various type of loan from meeting day to day expenses to

long term finance. Among those the product are as fellow:-

Working Capital Loans Term Finance Bridge Loans Project Finance Infrastructure Project Finance

Working Capital Loan : - Every organization requires money to meet the day to day businessoperations, for purchasing stocks and for acquiring raw materials for processing and

conversion to finished goods. Andhra Bank provides finance to purchase inventory directly by providing funded .Andhra Bank also provides receivables finance to provide liquidity tothe customers.

Term Finance : - It is a traditional activity by Andhra Bank. The Bank is providing termloans to meet capital expenditure for acquisition of fixed assets/expansion of existingactivity/swapping existing high cost debt. Bank is providing both funded and non fundedlimits under term finance .

Funded limit to meet cost of civil/ Infrastructure works, acquisition of assets etc. Non Funded limits for import/purchase of machinery deferred payment of taxes. The repayment period is designed in ease terms extending from 3 years to 15 years

including gestation period basing on the credit rating of the customer. Bridge Loans : - Andhra Bank is sanctioning Bridge Loans as an interim finance against

expected inflow of funds. Bridge Loans can be broadly categorized into two types, with or without the commitment of another Bank/Financial Institution. Bridge loans could besanctioned against expected equity issues/flows, against the expected proceeds of Non-Convertible Debentures, External commercial Borrowings, Global Depository Receipts

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and/or funds in the nature of Foreign Direct Investments also. The Bridge Loans arerepayable within one year.

Project Finance : - Andhra Bank is providing project finance to set up new projects .But nowa days the bank giving loan existing projects also. The Bank will be providing fee basedtechnical consultancy services to projects in course of time. It is generally given for more

than 12 years for a long term basis, and interest rate is varied time to time. Infrastructure Project Finance:- In India development is an important thing. Keeping in

view the tempo in infrastructure projects, Andhra Bank is providing finance to borrower companies engaged in: Developing Operating and maintaining Developing, operating and maintaining any infrastructure facility that is a project in any

of the following sectors:

1. A road project, including toll road, a bridge or a rail system;

2. A highway project including other activities being an integral part of the highway project'

3. A port, airport, inland waterway or inland port;

4. An industrial park or special economic zone ;

5. Generation, transmission and distribution of power

Industrial Development Bank of India

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About the Organization :- The Industrial Development Bank of India Limited commonlyknown by its acronym IDBI is one of India' s leading public sector banks and 4th largest Bank in overall ratings. RBI categorized IDBI as "other public sector bank". It was established in1964 by an Act of Parliament to provide credit and other facilities for the development of thefledgling Indian industry. It is currently the tenth largest development bank in the world interms of reach with 871 ATMs, 504 branches and 316 centers. Some of the institutions built

by IDBI are The National Stock Exchange of India (NSE), The National Securities Depository Services Ltd . (NSDL) and the Stock Holding Corporation of India (SHCIL) IDBIBank, as a private bank after government policy for new generation private banks.

Product & Services:-

Project Finance. Infrastructure Finance. Working Capital. Direct Discounting Bills Advisory Services.

Project Finance Scheme : - Under the Project Finance scheme IDBI Bank provides financeto the company for Industrial, commercial and Infrastructure projects. The Bank provides

project finance in both rupee and foreign currencies. IDBI Bank follows the Global BestPractices in project appraisal and monitoring and has a well-diversified industry portfolio.IDBI Bank has signed a Memorandum of Understanding (MoU) with LIC in December 2006for undertaking joint and take-out financing of long-gestation projects, includinginfrastructure & Power projects.

Infrastructure Finance : - IDBI Bank has been actively participating in structuring andfinancing of infrastructure projects in the areas of power, telecom, roads, seaports as well asSpecial Economic Zones. The Bank has also taken initiatives in funding modernization of airports, besides part-financing development of international airports and seaports under thePublic-Private Partnership route. The Bank is also a member of the Core Committee of theGovernment set up for finalization of the Ultra Mega Power Projects. IDBI Bank interactswith Government and other stakeholders and market participants, on policy and operationalissues, facilitating smooth flow of funds to infrastructure sector.

Working Capital Finance Scheme : - Working Capital facility is provided to the industry tofinance day-to-day needs. For production, funds are generally required for purchase of rawmaterials, stores, fuel, for payment of labor, for storing finished goods till they are sold out &for financing the sales by way of sundry debtors / receivables. For that Cash Credit facility isgranted to the customers to bridge working capital gap. They also Bank also provides short

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term loan facility for a period of up to 1 year for the purpose of bridging temporary cash flowmismatches arising due to various reasons like non-realization of receivables in time etc.

Direct Discounting of Bills Scheme : - For financially sound machinery / equipmentmanufacturer, who wish to promote sales, IDBI Bank provides deferred credit facility for sale/ purchase of indigenous machinery / equipment under its easy to operate direct discountingscheme. Assistance would be 100% of the total value (including insurance, taxes & freight).Discount rate would be as prevalent at the time of discounting of bills, depending onmonthly / quarterly / half-yearly/ yearly payments and according to temporal profile of bills.

State Bank of India

About the organization: - State bank of India is one of the oldest bank and largestcommercial bank in India in terms of profits, assets, deposits, branches and employees. The

bank traces its ancestry back through the Imperial Bank of India to the founding in 1806. The

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Government of India nationalized the Imperial Bank of India in 1955, with the Reserve Bank of India taking a 60% stake, and renamed it the State Bank of India. In 2008, the Governmenttook over the stake held by the Reserve Bank of India. The State Bank Group, with over 16000 branches, and 52 branches or offices in 32 countries. It has branches of the parent inColombo , Dhaka , Frankfurt , Hong Kong , Johannesburg , London and environs, Los Angeles ,Maldives , Muscat , New York , Osaka , Sydney , and Tokyo .It has a market share among Indian

commercial banks of about 20% in deposits and advances, and SBI accounts for almost one-fifth of the nations loans. The State bank of India is 29th most reputable company in theworld according to Forbes.

Product & Services: - SBI provide various range of product for long term debt. Working Capital Finance Project Finance Deferred Payment Guarantees Structured Finance Corporate Term Loans

Working Capital Finance: - Assistance extended both as Fund based and Non-Fund basedfacilities to Corporate Partnership firms, Proprietary concerns .Working Capital financeextended to all segments of industries and services sector such as Infrastructure, IT etc. SBIoffers working capital finance to meet the entire range of short-term fund requirements thatarise within a corporate day-to-day operational cycle. SBIs working finance productscomprise a spectrum of funded and non-funded facilities ranging from cash credit tostructured loans, to meet the different demands from all segments of industry, trade and theservices sector. Funded facilities include cash credit, demand loan and bill discounting. Non-funded instruments comprise letters of credit (inland and overseas) as well as bank guarantees(performance and financial) to cover advance payments.

Project Finance: - The SBI has formed a dedicated Project Finance Strategic Business Unitto assess credit proposals from and extend term loans for large industrial and infrastructure

projects. In general, project finance covers green field industrial projects, capacity expansionat existing manufacturing units, construction ventures or other infrastructure projects likePower Generation & transmission, Road, etc, capital intensive business expansion anddiversification as well as replacement of equipment may be financed through the project termloans.

Eligibility: - The infrastructure : - The project cost is more than Rs 100 Crores. The proposed share

of SBI in the term loan is more than Rs.50 cores. The commercial : - The minimum project cost is Rs. 200 crores. The minimum

proposed term commitment is of Rs. 50 cores from SBI.

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Deferred Payment Guarantees: - This loan is given for support purchase of capitalequipments for a long term Industrial or Infrastructure project.SBI can extend deferred

payment guarantees to Industrial projects or Infrastructure project for obtaining importedequipment.

Structured Finance: - SBI structured finance involves assembling unique creditconfigurations to meet the complex fund requirements of large industrial and infrastructure

projects. Structured finance can be a combination of funded and non-funded facilities as wellas other credit enhancement tools, lease contracts for instance, to fit the multi-layer financialrequirements of large and long-gestation projects.

Corporate Term Loan: - To support capital expenditures for setting up new ventures asalso for expansion, renovation etc. The SBI corporate term loans can support the company infunding ongoing business expansion, repaying high cost debt, technology up gradation, R&Dexpenditure, leveraging specific cash streams that accrue into company, implementing earlyretirement schemes and supplementing working capital. The banks corporate term loans aregenerally available for tenors from three to five years.SBI corporate term loans may carryfixed or floating rates. Again, these rates will be linked to the banks prime lending rate.SBIcorporate term loans can have a periodic repayment schedule, as required by the client. Therepayment mode may be linked to the cash accruals of the company.

There is some Other Institute who is provided finance to Indian Power sector. Among these Non-Banking Financial Institute, Foreign Institute are popular. These are like:-

Asian Development Bank GE energy financial services SRIE Finance World Bank

Asian Development Bank

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The ADB is the leading promoter of energy privatization in Asia and the Pacific. Throughenergy sector reform programs, the ADB requires countries to privatize state-owned electricityutilities and promote foreign investment in energy generation, transmission and distribution. TheADB believes that private sector participation in the energy sector will relieve governments' debt

burdens and allow scarce resources to be allocated to social sectors such as health and education. Yet

in India, the ADB's advice has led to escalating energy costs for consumers, increased debt burdensfor the government, and increasing windfalls for the private sector. In the energy sector,multinational corporations are the only ones that seem to benefit from the ADB's advice.

While the IMF and World Bank try to promote Power G,T,& D under government sector , theADB has tended to focus privatization in the energy sectors The ADB has promoted energy sector reform in countries like India, Pakistan and Tajikistan, etc .

ADB's advice is encouraging private companies to invest in and construct power plants. Theyhave argued that involving the private sector run in better way and the organization get benefits atlittle risk. In order to attract private capital, ADB suggest governments have signed agreements with

independent power producers (IPPs) in which economic risks and responsibility are unevenly borne by governments. In some cases, governments have signed contracts that guarantee payment even if there is no demand for electricity. In effect, economic risk has been transferred to the consumers whoare forced to subsidize private investment through levies, taxes, price increases and debt repayments.The private sector, in these cases, has received a disproportionate share of profits and privileges.

In India, the ADB's promote the energy sector reform by subsidize tariff for poor citizens andto farmers in Madhya Pradesh. To fulfill the loss of ADB-funded $250 million in power sector inIndia. In October 2000, the ADB approved another loan of $250 million for the establishment of anational grid for interstate power transmission and extended a partial credit guarantee for raising

another $120 million from commercial banks. The ADB's support of Power grid, the state companyoverseeing the unification of the national grid, is part of a move to encourage private sector involvement in the power sector. ADB also provide a policy loan of US$150 million and aninvestment loan of US$200 million to support a sector development program for the first phase of reforms.

In November 2005 Asian Development Bank (ADB) financing $400 million upgrading of Indias national power transmission grid. For that ADB provided loan to Power Grid Corporation of India for expand the capacity of the national transmission grid. ADB support to POWERGRIDestablishing a national grid.ADB also helps Indian government achieve its objective of providing100% electrification by 2012. The loan carries a 20-year term, including a grace period of five years.Interest is based on ADBs LIBOR-based lending facility. The project is expected to be completed byJune 2009.

Apart from Grid development ADB gives loan for Gujarat power reforms. AsianDevelopment Bank, as per the request of the Central Government, has agreed to give $350 million to

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Gujarat government. The Government has to give interest @ 7-8 on ADBs LIBOR-based lendingfacility. Out of that money Gujarat Government spent $150 million for reorganizing the Generationand $ 200 million for modernization of transmission and distribution equipment in the State power sector.

For boosting up in the power sector in North East India ADB provide loan $1,400 million for development projects. For that purpose ADB also give two phases loan $300 million will be givenin 2006 and the second $200 million in 2008 for development of total infrastructure like Road, Urbanarea for helping to development of that project. ADB also gives assistance to PFC Clears Rs 750 bygiving Loan to them. For by this loan PFC can helps Indias power sector reform. To reform PFCgives loan to the state electricity boards which are undergoing restructuring. The loan will have amaturity period of 20 years including a grace period of five years on ADBs LIBOR-based lendingfacility.

Though ADB gives his helping hand but some people things this will harm in the power sector. According to Mr.K.R. Unnithan General Secretary, Kerala state Electricity Board Officers

Association "Government's willingness to tow the ADB line. The ADB's plan was to transform the power supply service in the State into a highly profitable commercial activity .They also try to makeSEB into a companies. These companies would then be privatized and, gradually, the sector would

be freed of the controls of the Regulatory Commission too. Ultimately, electricity supply would betotally at the mercy of the market forces. He also said that Government, for the sake of a Rs. 3,000-crore loan, was mortgaging the hard-earned right of the citizens to be the masters of their owndestiny. The interest on this loan was to be returned in dollars. The effective interest rate, therefore,would be very high since the rupee-dollar exchange rates were constantly changing to thedisadvantage of the rupee.

So in a nutshell we can say ABD is a good source for rising fund in the power sector. But inthe present situation its may be a problem to rising any fund due to political hazard. So we shouldtwice before raising fund for ADB.

SREI Infrastructure Finance Ltd.

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About the organization:- Srei Infrastructure Finance Ltd. is one of India's leading NonBanking Financial Institutions and the only private sector infrastructure financing NBFI. Itcommenced its operations in 1989 with the objective of actively participating in nation

building process and was visionary in selecting Infrastructure sector as its principal growtharea. Today, Srei has developed expertise in financing of infrastructure equipment (for construction, mining, oil & gas, power and others), infrastructure projects, infrastructuredevelopment and advisory in all verticals of infrastructure. With a customer base of over 15,000, over Rs. 8,000 crore in Assets under Management and total capital base of over Rs.700 crore, Srei today has emerged as the largest player in a fiercely competitive market of infrastructure equipment financing.

Product & Services :- SREI Infrastructure provided number of product & Services to theinfrastructure company. Among these some are Fund based and some are non fund basedProduct. These are

Infrastructure Equipment Finance Infrastructure Project Finance

Infrastructure Equipment Finance : - It can be classified into two broad head.

Infrastructure Equipment Finance : - It is the largest business division of thecompany. In fact, Srei today, holds a leading position in the construction equipmentfinancing industry in India. The divisions primary activity is the leasing and hire

purchase of infrastructure, construction equipment and machineries to variousconstruction companies and small and medium scale enterprises engaged in civil andmechanical construction.

Asset Finance :-The Asset Finance Division caters to the equipment financerequirements of the infrastructure industry. Srei's financial products cater to thewidest spectrum of users ranging from First time users and buyers to the largestcorporate construction houses and project developers. Srei has played a leading rolein mechanization of this industry and is considered a pioneer in introducing newtechnologies and finances the largest range of imported sophisticated equipment for infrastructure industry. The Product offerings of Srei can be broadly classified as:

New equipment FinancingUsed Equipment FinancingOperating leases

Infrastructure Project for power Project: - A significant portion of Srei's portfolio is

deployed in the Energy sector with a focus on eco-friendly power. Apart from conventionalGas and Coal-based power projects, Srei has assisted Captive Power plants utilizing waste

byproducts and non-conventional energy projects. We provide our services for Greenfield power projects, capacity expansions, and modernizations.

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Srei's asset-financing approach and ability to offer a package of fund and non-fund facilitiesenables sponsors to procure key equipment in the early stages of project development andsubstantially reduce implementation time and risks.

Products & Services Lease of power plant equipment

Letters of Credit for import of equipment Foreign currency loans for imported equipment Project Advisory Services Debt Syndication Rupee Term loans.

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WORLD BANK

The World Bank has been associated with the Indian power sector for several decades. The Bank not only provided fund for the project, but also provided technical assistance for the developing a

project. The Bank has main two institutes by which they can provide fund for any project. These are

The International Bank for Reconstruction and Development (IBRD) The International Finance corporation (IFC)

Over the few years the maximum fund (around 60%) for power transmission sector is given byWorld Bank. But now a days World Bank giving fund for restructuring on the hydro and renewalenergy sector. According to a senior energy specialist of World Bank The World Bank maximumfunding for power project has been in the Transmission segment (Power Grid Corporation).It also

provided several SEB for restructuring their power sectors.

According to World Bank the biggest beneficiary of the fund provided by them in India is Power Grid Corporation. In October, 2008 the bank approved $400 million loan to the company for 30 yearsincluding 4 years grace period .Prior to that in 2003 World Bank (IFC) provided $75 million loan toTata Transmission Line Ltd the 1 st ever private transmission project in India. In 2006 World Bank

also give $450 million for Power System Developments Project in transmission segment. In 2008World Bank approved $600 million to power Grid Corporation for restructuring the interregional

power transmission project during the 11th Five year Plan (2007-2012) .This loan was blocked by agovernment of India guarantee.

Apart from the funding in the transmission sector World Bank also finance in generation sector.In September 2007 World Bank approved $400 million for expansion of Satluj Jal Vidyut Nigam for developing of 412 MW Hydro power project in Himachal Pradesh. Prior to that in 2003 World Bank also financed in $49 million for 192 MW project in Himachal Pradesh. In that loan the financing ismade on the basis $42 million as a debt fund and $7 million as a equity fund. In the year 2000

World Bank also financed with the Indian Renewable Energy Development Agency Limited(IREDA) for developing small hydro project. In this scheme World Bank allow $130 million toIREDA. In addition to that amount World Bank also provided $5 million for Environmentrestructuring. In 2008 World Bank also provides $450 million for Power plant of Tata power company, the loan has 20-year tenor.

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World Bank is also financed in the State Electricity Board for restructuring in the energy sector especially in distribution sector. As an example World Bank provided $180 million to Rajasthangovernment for power sector restructuring .Similarly World Bank also provided some fund AndhraPradesh, Uttar Pradesh, West Bengal in the same category. This fund is basically provided for development of power distribution sector in the rural area.

In a nutshell we can say World Bank take a huge role in the Indian power sector. World Bank provided various fund, technical help in the power sector at a 360 o basis. That is World Bank provided fund for Generation, Transmission and Distribution sector. Its also provided some fund inthe state level directly for restructuring their power sector. According to some senior personnel of the

bank World Bank also provided fund, technical assistance and Guarantee for achieving the missionPower for All by 2012 by Indian government.

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Project Appraisal Process is Done By FinancingInstitute

The following aspect is judge at the time of Project Appraisal process by CRISEL & ICRAfor debt financing behalf of PTC, REC, SBI, IDBI, etc.

Eligibility

Regional Development Rational use of energy, efficiency Environmental protection

Technology and Design

Project Definition Viability and performance Adaptation to technical progress Local-specific requirements Appropriate technical capacity Life expectancy

Economic & Financial Viability

Cost effectiveness Financial internal rate of return Economic internal rate of return Pay-back period

Investment Cost

Local and foreign currencies

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Phasing of expenditure Cost justification

Market prospects

Demand pattern Degree of competition Tariff level and structure Product quality

Legal Framework

Policies, public acceptance Licensing Environmental compatibility Procurement

Time Schedule

Preparation of feasibility studies Environmental studies Licensing requirements Time needed for procurement Local conditions (climatic, etc)

Promoters standing

Management capability Business strategy Financial robustness Access to loan securities

Environmental Compatibility

Direct, indirect, long-distance effects Preventions Compliance with international standards

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EQUITY FUNDApart from debt financing Power Company gets finance Equity financing also. Like NTPC,

NHPC, Reliance Power get fund from selling Equity. In the power sector, the return on equity isfixed at 15.5% on 30% of the equity investment. The sources of equity are promoters equity,internal accruals, equity funds and strategic equity investors. Raising funds from capital markets isalso becoming increasingly popular. The following are some of the sources of equity available to

power project developers:

Promoters Equity and Internal Accruals: - Most project developers invest some amount of the total project cost as promoters equity to be able to earn the minimum return on equity andraise the required debt. Many CPSUs, including National Thermal Power Corporation (NTPC)are increasingly relying on internal accruals for investing equity in new projects.

Primary/Capital Markets:- In recent times, power sector companies have been raising fundsfrom primary markets through Initial Public Offerings (IPOs). Almost all IPOs of power companies in the last two to three years have met with an overwhelming response from investorsor have been performing well in the stock markets. Some of the successful IPOs have been those

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of CPSUs like NTPC, and NHPC, private developers like TATA POWER, JP Hydro andReliance Power. Many power companies are expected to launch their IPOs in the coming years.

NTPC is also planning to come out with a follow-on public offer. Qualified Institutional Placements: - Another source of equity, which is increasingly being

tapped by power sector companies, is private placement with qualified institutional investors. For

instance, GVK Power & Infrastructure Limited (GVKIL) and Kalpataru Power Transmissionraised USD 300 million and USD 85 million respectively through this route in May 2007 andSeptember 2006 respectively. PTC India also rose around USD 29 million through this route inJanuary 2008 by allotting shares to institutional buyers like LIC and Morgan Stanley, amongothers.

Equity Funds:- Specialized equity funds such as India Development Fund by InfrastructureDevelopment Finance Company (IDFC) have been set up to invest in equity in private sector

power sectors. The India Power Fund by PFC which was expected to be launched in 2004 ishowever, yet to start operations. India Infrastructure Finance Company Limited (IIFCL),Citigroup, Blackstone have also instituted a USD 5 billion India infrastructure financing initiative

for investing in infrastructure projects. PTC Indias investment arm PTC Financial Services also plans to pick up equity in power projects through an Energy Equity Fund.

MUTUAL FUNDOne of the major ways of raising the fund in the power sector is Mutual Fund .Mutual funds

constantly come out with different schemes. . Infrastructure funds are part of a mutual fund categorycalled thematic funds. While sector specific funds invest in particular sectors like informationtechnology, power, oil and gas, etc, thematic funds invests in themes like infrastructure,consumption-led categories like the retail industry and outsourcing companies. Today, there is a huge

buzz about the Great Indian Gold Rush and its three themes Infrastructure, Consumption, Outsourcing

Of these three, Infrastructure funds have caught the fancy of a lot of mutual funds; many newfunds have been launched in this category in the last couple of years.

Now a days various financial companies like ICICI Prudential Mutual Fund, Birla Sun lifeMutual Fund, Tata Mutual Fund, UTI, and Reliance Mutual Fund comes to this sector. Thesecompanies are raising fund from market and invest in this sector. These companies basically issue an

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open-ended equity funds; this means you can invest in them whenever you like. Mutual fundcompanies are also trying to enhance the sources of fund in Infrastructure as well as power sector.

Some funds have concentrated holdings this means they have invested in a fewer number of stocks, but have put more money in each stock than the others. For example Prudential'sinfrastructure fund is the most concentrated with as few as 34 stocks. Tata Mutual Fund in thisorder, are the most diversified and have more number of stocks. The common stocks that most of these infrastructure funds have invested in are Reliance, BHEL, NTPC and Power Grid, etc. sometime these mutual fund companies are also given fund to various Financial Institute .As an exampleIDFC Mutual fund raised fund from market for Infrastructure Development Finance Company, bythis the mutual fund company helps for raising fund in the Indian infrastructure sector. This Fund aregenerally apply in the stock market, but some companies like Reliance Mutual Fund, Birla Sun lifeMutual Fund ,TATA Mutual Fund etc also Invest in the Derivative market ,i.e. Future Market,Forward Market and Option Market.

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FINANCIAL STUDY OF SELECTED POWER COMPANIES

To study and analyze the power sector better, the comparative and analytical study of the Top 4 and

Bottom 4 listed firms of power sector in India are done. The firms are chosen based on their sales

turnover. The below are the firms selected by us for the study,

TOP 4

NTPC

Reliance Energy

Tata Power

Power Grid

BOTTOM 4

JP Hydro

Energy Develop

KSK ENERGY

Indowind Energy

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RATIO ANALYSIS

Financial ratio analysis can reveal much about a company and its operations. However, there are

several points to keep in mind about ratios. First, a ratio is a "flag" indicating areas of strength or

weakness. One or even several ratios might be misleading, but when combined with other knowledge

of a company's management and economic circumstances, financial analysis can tell much about a

corporation. Second, there is no single correct value for a ratio. The observation that the value of a

particular ratio is too high, too low, or just right depends on the perspective of the analyst and on the

company's competitive strategy. Third, financial ratios are meaningful only when compared with

some standard, such as an industry trend, ratio trend, a trend for the specific company being

analyzed, or a stated management objective.

Key Ratios

Debt-to-equity ratio:

A debt-to-equity ratio, which is the total debt of an entity divided by the total equity of that entity, is

a measure of the use of leverage or a measure of risk. Leverage is the use of other people's money to

make money.

The greater an entity's debt-to-equity ratio, the greater is the opportunity for high returns for thatentity. The debt-to-equity ratio is also a measure of risk since the more debt that is used, the greater

the risk that the entity might be forced to liquidate and go out of business.

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Long Term Debt-to-equity Ratio:

It is a capitalization ratio comparing long-term debt to shareholders' equity. Its a measure of a

company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It

indicates what proportion of equity and debt the company is using to finance its assets. Sometimes

only interest-bearing, long-term debt is used instead of total liabilities in the calculation. It is also

known as the Personal Debt/Equity Ratio, this ratio can be applied to personal financial statements as

well as companies. A high debt/equity ratio generally means that a company has been aggressive in

financing its growth with debt.

Current Ratio:

An indication of a company's ability to meet short-term debt obligations; the higher the ratio, the

more liquid. Current ratio is equal to current assets divided by current liabilities. If the current assets

of a company are more than twice the current liabilities, then that company is generally considered to

have good short-term financial strength. If current liabilities exceed current assets, then the company

may have problems meeting its short-term obligations.

Turnover Ratios:

Interest Cover Ratio:

It is a ratio used to determine how easily a company can pay interest on outstanding debt. The

interest coverage ratio is calculated by dividing a company's earnings before interest and taxes

(EBIT) of one period by the company's interest expenses of the same period. The lower the ratio,

the more the company is burdened by debt expense. When a company's interest coverage ratio is

1.5 or lower, its ability to meet interest expenses may be questionable. An interest coverage ratio

below 1 indicates the company is not generating sufficient revenues to satisfy interest expenses.

Fixed Asset Turnover:

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A long-term, tangible asset is held for business use and not expected to be converted to cash in the

current or upcoming fiscal year, such as manufacturing equipment, real estate, and furniture. A high

fixed asset turnover is preferred since it indicates a better efficiency in fixed assets utilization.

Inventory turnover:

Its a ratio showing how many times a company's inventory is sold and replaced over a period. This

ratio measures the stock in relation to turnover in order to determine how often the stock turns over

in the business. It indicates the efficiency of the firm in selling its product. Possessing a high

amount of inventory for long periods of time is not usually good for a business because of inventory

storage and obsolescence costs.

Debtors Turnover Ratio:

Indicates the relation between net credit sales and average accounts receivables of the years. Its also

known as debtors velocity. This ratio indicates the efficiency of the concern to collect the amount

due from debtors. It determines the efficiency with which the trade debtors are managed. Higher the

ratio, better it is as it proves that the debts are being collected very quickly.

ROCE:

Return on Capital Employed (ROCE) is used in finance as a measure of the returns that a company is

realizing from its capital employed. It is commonly used as a measure for comparing the

performance between businesses and for assessing whether a business generates enough returns to

pay for its cost of capital.

RONW:

Return on Net Worth is the ratio of net income after taxes to total net worth at the end of the year.

This ratio indicates the return on stockholder's total equity. Also known as Return on equity which

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measures a corporation's profitability by revealing how much profit a company generates with the

money shareholders have invested.

RATIO ANALYSIS OF INDUSTRY

Though the value of debt to equity ratio depends on overall financial situation, goals,employment security, risk aversion, tax implications, etc., the value of debt to equity ratio in Indian

power industry is 0.75 which shows that there is 75 paisa debt for every 1 rupee of share holders

funds which is not a very high value and firms are moderately strong to meet the repayment

requirements. The long term debt equity ratio (0.73) is nearly equal to the debt- equity ratio which

shows that the companies of this sector are able to fulfill its long term repayment requirements as

efficiently as other liabilities and the business is not at high risk.

In case of current ratio the rule of thumb says that the current ratio should be at least 2, but in power industry t he current ratio of 1.59 shows that it is less than required value, thus it is seen that

this industry should increase current assets and should control the current liabilities. In the power

industry the value of inventory turnover ratio of 14.2 can also be said in the form of 365 /14.2 = 25.7

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days. The ratio shows a relatively high stock turnover which would seem to suggest that the business

deals in the field which require fast moving of its product i.e. electricity. Generally, the higher the

firms total asset turnover, the more efficiently its assets have been utilised. Always high fixed assets

turnovers are preferred since they indicate a better efficiency in fixed assets utilization.

In case of Indian power industry a very low value (0.47) of fixed asset turnover shows that

the fixed assets of the industry have not been utilized efficiently. The value of interest cover ratio is

2.96 is very impressive in Indian power sector. It shows that the firms in the industry are strong

enough to pay the interest expenses timely. The value of Return on capital employed (8.79) is not

very good return but with the high value of interest cover ratio and slightly lower value of debt to

equity ratio in the industry the return on capital is in the moderately good condition.

RATIO ANALYSIS OF THE INDIVIDUAL COMPANIESNTPC Limited

In NTPC the debt-equity ratio has not changed since 2004 as the values the change is only 0.01during 2004 to 2006 and the change is 0.07 during next two years. This shows the lower level of financial leverage which is not a good sign for the company. However companys profitabilitydetermines the debt equity ratio yet the high profitability of the company do not suggest such a lower value of debt equity ratio.

Current ratio of the company is showing U-shape trend during 2004 to 2008 and like previousdays company has again reached to good liquidity position. The fixed asset turnover ratio has shown50% growth in last 5 years but it is still low and company should maximize its asset utilization. Ahigh debtor turnove

Documents

19957971 Sources of Fund in Indian Power Sector