PFC, Tata Capital to set up $1 billion PE fund for private power projects

State-run Power Finance Corporation said it would set up a $ 1 billion private equity (PE) fund in joint venture with Tata Capital to invest in the equity of private power projects. Tata Capital will have 51 percent equity holding in the JV, while PFC shall have 49 percent stake. The fund initially is targeted to have corpus size of $1 billion, a company official said.

Alongwith debt, there is huge equity requirement in the power sector projects so PFC has decided to set up private equity fund, he said.

[caption id=“attachment_554902” align=“alignleft” width=“380”]  PFC’s target for sanctions this fiscal (2012-13) stood at Rs 45,140 crore. Reuters[/caption]

“We have selected Tata Capital as our joint venture partner for setting up a PE fund…in which they would be having 51 percent stake and PFC 49 percent,” PFC Director Finance R Nagarajan told reporters. “PFC is in the process of finalising the JV terms. The fund is expected to become operational over the next six-nine months period,” he said.

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“To begin with we target a corpus of $ 250-300 million,” Nagarajan said. The power sector lender, has already started funding for the availability of fuel sources like coal mine, coal transportation facility, and laying of gas pipelines, so as to bridge the widening gap in availability of fuel sources.

PFC’s target for sanctions this fiscal (2012-13) stood at Rs 45,140 crore, of which it has sanctioned Rs 41,732 crore.

While, out of Rs 40,000 crore distribution target it has disbursed Rs 17,555 crore, he said. As per the 12th Five Year plan projections the GoI is targeting investments to the tune of Rs 45 lakh crore in infrastructure sector, of which Rs 14 lakh crore is expected to be in power sector. The total disbursements (loan) as per company balance sheet is Rs 1.40 lakh crore.

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“The balance available is Rs 1.69 lakh crore, for future disbursements say over the next two-three years,” Nagarajan said. PFC’s average cost of borrowing as on September 30, 2012 stood at 9.16 percent, while its net interest margin (NIM) was 4.23 percent.

The interest spread of PFC-difference between borrowing cost and lending rate-stood at 2.68 percent, which has gone up compared to 2.25 percent as on 31 March 2012. The Government of India has 73.72 percent equity shareholding in the company, which up till 2007 used to be a fully government owned entity.

PTI