INTERNATIONAL FINANCING ON POWER PROJECTS

SUMMER TRAINING REPORT On “International Financing On Power Projects” at

For the period 13 June, 2011 to 05 August, 2011 Under the guidance of Shri K. Sreekant Additional General Manager (IF) Submitted By Sandeep Anand 2nd Year Student of MBA in Power Management Roll no. 79 Batch 9th (2010-2012)

Sector-33, Faridabad-121003, Haryana
Affiliated to

Maharishi Dayanand University, Rohtak
1

INTERNATIONAL FINANCING ON POWER PROJECTS DECLARATION
I, Sandeep Anand, (Roll No. 79), MBA - Power Management (2010-2012 Batch), of National

Power Training Institute, Faridabad, hereby declare that the summer training report Entitled “INTERNATIONAL FINANCING ON POWER PROJECTS”

Is an original work and the same has not been submitted to any other institute for the award of

Any other degree.

A seminar presentation of the Training report was made on_________________ and the

Suggestions as approved by the faculty were duly incorporated.

K.P.S.Parmar Presentation in- charge NPTI, Faridabad M.B.A (9th Batch), NPTI

Counter signed:(Director/ Principle of the institution)

2

INTERNATIONAL FINANCING ON POWER PROJECTS CERTIFICATE
This is to certify that the summer project work of Sandeep Anand titled ―INTERNATIONAL FINANCING ON POWER PROJECTS” is an original work and that this work has not been assigned to anybody in any form. The project work was carried from 13-June-2011 till 05August-2011 at NTPC Ltd., Corporate Centre, Scope Complex, Core7 Institutional area, Lodi Road, New Delhi-110003.

Date: August- 05- 2011

Shri K. Sreekant Additional General Manager (IF) NTPC Ltd.

3

CAMPS. I am greatful to my friends who gave me the moral support in my times of difficulties. Mr. Core7 Institutional area. NPTI and Mr. for giving me the opportunity to undergo my summer internship at NTPC LTD. Director). Mr. CAMPS. Rao (Principal Director).Director). Mr. Mrs. Rohit Verma (Dy.INTERNATIONAL FINANCING ON POWER PROJECTS ACKNOWLEDGEMENT I am having great pleasure to present this report entitled “INTERNATIONAL FINANCING ON POWER PROJECTS”. Amit Kumar Mishra. I would like to express my sincere thanks to my guide Mr. Farida Khan. Mr.S Parmar (Project guide). Lodi Road. Last but not the least I would like to express my special thanks to my family for their continuous motivation and support. Indu Maheshwari (Dy. NPTI (National Power Training Institute) for their valuable inputs. New Delhi-110003.S. J. I wish to thank. Ms.S. Chaudhary (Director). NTPC LTD. Scope Complex. Director). S. Additional General Manager. CAMPS.. I wish to make a special mention of Mrs.K. Manju Mam (Dy. NPTI for providing me an opportunity to do my summer internship at NTPC Ltd. Sunil Kumar Goyel for providing me the necessary resources for carrying out the study and for his timely and continued support and more importantly his guidance without which this report would have been incomplete. I take this opportunity to express my sincere thanks to all who contributed to make this a success. K.P. First of all I would like to take the opportunity to thanks Shri K. Sandeep Anand 4 . which was a great learning for me. Sreekant.

INTERNATIONAL FINANCING ON POWER PROJECTS ABBREVIATIONS
ADBECAAFBDEIBEBRDJBIFERMOCFNCFIBRDIMFTASFJSFDMCFIASMIGAFILSILSIMAPLAsian Development Bank Economic Credit Agency African Development Fund European Investment Bank European Bank for Reconstruction & Development Japan Bank of International Corporation Foreign Exchange Risk Management Operating Cash Flow Free Cash Flow International Bank for Reconstruction & Development International Monetary Fund Technical Assistance Development Fund Japan Special Fund Developing Member Countries Foreign Investment Advisory Service Multilateral Investment Guarantee Agency Foreign Investment Loan Special Investment Loan Sector Investment & Maintenance Loan Adaptable Program Loan
5

INTERNATIONAL FINANCING ON POWER PROJECTS
LILFILERLSALSALPSALSSALRLDRLIMFWBFEMAFERVWACCNPVIRRUNCITRALOPICLearning & Innovation Loan Foreign Investment Loan Emergency Recovery Loan Structural Adjustment Loan Sector Adjustment Loan Programmatic Structural Adjustment Loan Special Structural Adjustment Loan Rehabilitation Loan Debt Reduction Loan Internationally Monetary Fund World Bank Foreign Exchange Management Act Foreign Exchange Rate Variation Weighted Average Cost of Capital Net Present Value Interest Rate of Return United Nations Commission on International Trade Law Overseas Private Investment Corporation

6

INTERNATIONAL FINANCING ON POWER PROJECTS Table of Contents
1. 2. EXECUTIVE SUMMARY................................................................................................................. 10 ORGANIZATION PROFILE ............................................................................................................. 11 2.1 Vision ................................................................................................................................................ 11 Mission: - ................................................................................................................................................ 11 Core Value: - ........................................................................................................................................... 11 2.2Diversified Growth: - ......................................................................................................................... 11 2.3 Future Capacity Additions: - ............................................................................................................. 13 2.4 Subsidiaries: - .................................................................................................................................... 14 2.5Business Development: -.................................................................................................................... 15 2.6Balance Sheet: -.................................................................................................................................. 16 2.7 SWOT analysis of NTPC .................................................................................................................. 17 3. 4. 5. 6. 7. 8. 9. 10. 11. OBJECTIVE OF THE PROJECT....................................................................................................... 19 SIGNIFICANCE OF THE PROJECT ................................................................................................ 20 SCOPE OF THE PROJECT ............................................................................................................... 20 RESEARCH METHODOLOGY OF THE PROJECT ....................................................................... 21 INTRODUCTION .............................................................................................................................. 22 KEY TERM OF INTERNATIONAL FINANCE............................................................................... 27 DIFFERENCE BETWEEN DOMESTIC FINANCE & INTERNATIONAL FINANCE ............. 33 ROLE OF WORLD BANK, ADB, IFC ......................................................................................... 34 TYPES OF LOAN ...................................................................................................................... 40

11.1 Investment loans ......................................................................................................................... 40 11.2Adjustment loans: - Adjustment loan........................................................................................... 40 11.3Specific Investment Loan............................................................................................................. 40 11.4Sector Investment and Maintenance Loan ................................................................................... 40 11.5Adaptable Program Loan ............................................................................................................. 41 11.6Learning and Innovation Loan ..................................................................................................... 41 11.7Technical Assistance Loan........................................................................................................... 42 11.8Financial Intermediary Loan ........................................................................................................ 42 11.9Emergency Recovery Loan .......................................................................................................... 42 11.10Structural Adjustment Loan ....................................................................................................... 43 11.11Sector Adjustment Loan............................................................................................................. 43 7

.......................................................................................................................................................................8 ARTICLE VIII PROJECT IMPLEMENTATION ..............................3 ARTICLE III CURRENCY PROVISIONS.... 70 14.................1........................................................................................................1 EXTERNAL COMMERCIAL BORROWINGS (ECB) .........................7 Payment risk: ........4 ARTICLE IV DISBURSEMENT OF THE LOAN ................................10 Arrangements for risk mitigation .............................3 Operating risk: .......................................................................................................................................... 44 12.........................................................................................13Special Structural Adjustment Loan .............. LOAN AGREEMENT ...........1 ARTICLE I DEFINITIONS ................... 70 15................................ 53 12..................................................................................... 61 12............................ 78 15............1...........................................................15Debt Reduction Loan .............. 55 12.......... 78 15....................APPLICABLE LAW ...........................14Rehabilitation Loan ............... 78 15...... 44 11.... 79 15..........7 ARTICLE VII TAXES ............................................................................................................... 81 16....................................1...................................................SETTLEMENT OF DISPUTES .................................................................. 66 REGULATORY FRAMEWORK FOR INTERNATIONAL FINANCE .COMMITMENT CHARGE ........................................ 43 11......................................................................... 97 8 ..COOPERATION AND INFORMATIONFINANCIAL AND OTHER INFORMATION ..................................................................... 44 11............... RISKS FOR THE INVESTORS .....................NEGATIVE PLEDGE (PARI PASSU) ......................................... 80 15............................................. 47 12........ 64 13............................................................5 ARTICLE V CANCELLATION AND SUSPENSION ...................1......................9 ARTICLE IX ............................................................................................. 78 15......................................................2 Construction risk: ...1.......................................... 45 12...............1.................................................... 60 12..................................................................... 45 12.........................SPECIAL COMMITMENT CHARGE AND REPAYMENT ..... 81 15............. 79 15...........................................1 Risk mitigation ..........................................4 Market risk: -....................... 14................................. WHY NTPC IS SUPERIOR THAN OTHERS?..................................5 Interest rate risk: ........................................................................................................................... 82 CONCLUSION ....12Programmatic Structural Adjustment Loan ...1.......... DATA ANALYSIS OF THE PROJECT ..................................................................6 ARTICLE VI ACCELERATION TO MATURITY .............................................. 80 15................................2 ARTICLE II LOAN ACCOUNT ............................................................................................ 61 12............................................ 17...........................INTERNATIONAL FINANCING ON POWER PROJECTS 11.................................................6 Foreign exchange risk: ..............9 Political risk: .............1...........8 Regulatory risk: -............ 50 12............................1........................................... 80 15..............

.............. 90 Table 15..............................................................................................8: Differential Interest of all banks.2: Capacity Addition Growth in plan wise manner ....................................... 26 9 ..........................................................................................................................................................................................................................Capacity Addition Breakup (XIth) power plant ..................................................................... 89 Table 15..........................................1: Opening Loan balance sheet of all banks ..... 89 Table 15.....................3: Weighted average of KFW Bank ........................................................................2: Loan wise Allocation of Interest (Net Charge) as on 04/07/2011 .................................................1: XIth plan Capacity Addition Targets & Achievement ..................... 91 Table 15.......................................5: Investment targets by Government.......................1:International Financiers of Coal fired plants ................. 82 Table 15.............. 25 Figure 6. 23 Table 6............................................................................ 98 LIST OF TABLE Table 6........... 97 BIBILIOGRAPHY .......................................................... 23 Figure 6................ 25 Table 15...............7: Interest allocation of KFW Bank on different projects..........................................6: Foreign Exchange Rate Variation (FERV) of KFW Bank on different projects ..................................................................3: Financial Closure Scenario For Private Capacity as per 11th plan ..................................... 95 LIST OF FIGURE Figure 6....................... RECOMMENDATION & SUGGESTION ........... 24 Figure 6........................................................................................................... 24 Figure 6.......................................... 25 Table 6.......4: Investment .............5: Guarantee fee of World Bank allocated on different projects ... 83 Table 15................4: Guarantee fee payable on IBRD For the period 01/04/2011 to 04/07/2011 ............................................. 87 Table 15..............................2: ......................... 19..4: Investment in Power Sector.INTERNATIONAL FINANCING ON POWER PROJECTS 18.............. 22 Table 6..........................................3: Capacity Addition Private Sector .....

The report elaborates various internationally financed projects on coal fired power plants. Report discusses international financial funding of domestic companies like TATA POWER.INTERNATIONAL FINANCING ON POWER PROJECTS 1. state sector. The capacity addition in private sector comprises of different domestic companies which have different capacity addition values. XIth and XIIth plan (projected).The graph of capacity addition shows relationship between different sectors. EXECUTIVE SUMMARY The report is all about the Maharatna Company (NTPC Ltd. and ADANI POWER. The introduction part deals with the role of public international financial institutions like Multinational Development Bank and Economic credit agency. Asian Development Bank. role of Multinational Development Bank (World Bank. exchange rate which distinguish the domestic & international financing. RELIANCE POWER. Both of them has important role in international financing on coal fired power plants.) which is an integrated power producer and International Financing on power Projects. RBI is the regulatory body responsible for the regulatory framework of international finance on External commercial Borrowing. and private players in power sector during Xth. 10 . its target & achieved value. The report also signifies the investments done by govt.conventional sources of energy . International Finance Corporation & its function). central sector and all conventional & non. we can calculate the total capital expenditure for conventional & non – conventional source of energy. During study of report we see financial closure of private capacity of XIth plan. A comparison of capacity addition during five year plans is shown with the help of graph which clearly indicates the amount of capacity added during these plans. The report shows the increase in the capacity addition during XIth plan of all different sectors like private sector. NTPC. types of loan. The report includes various key aspects of international finance which have been discussed in the report for clear understanding of the subject. The report also includes the study of data of investment in different sector as well as conventional & non-conventional source of energy. loan agreement which plays a vital role and the risk involved for foreign investors.

854 MW. NTPC has embarked on plans to become a 75. by the year 2032. was set up in 1975 to accelerate power development in India. NTPC ranked 341st in the ‗2010. Along with this 11 . with a significant presence in the entire value chain of power generation business. Further.‖ Core Value: . Forbes Global 2000‘ ranking of the World‘s biggest companies with a current generating capacity of 34. India's largest power company.“To be the world’s largest and best power producer. related products and services at competitive prices.BCOMIT       Business Ethics Customer Focus Organizational & Professional Pride Mutual Respect & Trust Innovation & Speed Total Quality for Excellence 2. 28% of NTPC‘s installed generating capacity will be based on carbon free energy sources.―Develop and provide reliable power. powering India’s growth.1 Vision: . 11% nuclear energy.” Mission: . integrating multiple energy sources with innovative and eco-friendly technologies and contribute to society.INTERNATIONAL FINANCING ON POWER PROJECTS 2. the coal based capacity will increasingly be based on high-efficientlow-emission technologies such as Super-critical and Ultra-Super-critical. 9% renewable energy and 8% hydro power based capacity. 2. As such. NTPC plans to become a 75 GW company by the year 2017 and envisages to have an installed capacity of 128 GW by the year 2032 with a well-diversified fuel mix comprising 56% coal. ORGANIZATION PROFILE NTPC.2Diversified Growth: As per new corporate plan.000 MW company by 2017. 16% gas. It is emerging as an ‗Integrated Power Major‘.

Power Trading: 'NTPC Vidyut Vyapar Nigam Ltd. NTPC has also made long strides in developing its Ash Utilization business.' (NVVN).‘. Nuclear Power: A Joint Venture Company "Anushakti Vidhyut Nigam Ltd. NTPC has ventured into coal mining business with an aim to meet about 20% of its coal requirement from its captive mines by 2017. a wholly owned subsidiary was created for trading power leading to optimal utilization of NTPC‘s assets. is setting up hydro projects of capacities up to 250 MW. 12 . Coal Mining: In a major backward integration move to create fuel security. A wholly owned subsidiary. It is the second largest power trading company in the country." has been formed (with 51% stake of NPCIL and 49% stake of NTPC) for development of nuclear power projects in the country. Renewable Energy: In order to broad base its fuel mix NTPC has plan of capacity addition of about 1. In its pursuit of diversification NTPC has developed strategic alliances and joint ventures with leading national and international companies. NTPC will utilize a strategic mix of options to ensure fuel security for its fleet of power stations..000 MW through renewable resources by 2017. Two more projects have also been taken up in Uttarakhand. ‗National Power Exchange Ltd. PFC and TCS has been formed for operating a Power Exchange. The Government of India has so far allotted 7 coal blocks to NTPC. NTPC made changes in its strategy and diversified in the business adjacencies along the energy value chain. Looking at the opportunities coming its way. Hydro Power: In order to give impetus to hydro power growth in the country and to have a balanced portfolio of power generation. NTPC Hydro Ltd. NHPC. a JV of NTPC.INTERNATIONAL FINANCING ON POWER PROJECTS growth. In order to facilitate power trading in the country. due to changes in the business environment. including 2 blocks to be developed through joint venture route. NTPC entered hydro power business with the 800 MW Koldam hydro projects in Himachal Pradesh.

3 Future Capacity Additions: NTPC has formulated a long term Corporate Plan up to 2032. was set up for distribution of power. NTPC has also acquired stake in Transformers and Electricals Kerala Ltd. Ash is being used as a raw material input by cement companies and brick manufacturers. Mauda ( 2 x 500) 8. velour I -JV with TNEB ( 2 x 500) 5.JV with IPGCL & HPGCL ( 3 x 500) Haryana 2. NVVN is engaged in the business of Fly Ash export and sale to domestic customers. Joint ventures with cement companies are being planned to set up cement grinding units in the vicinity of NTPC stations. Rihand III(2X500) 9. Bongaigaon(3 x 250) 7. 2. (TELK) for manufacturing and repair of transformers. for power plant equipment manufacturing. the capacity addition under implementation stage is presented below: PROJECT Coal STATE MW 1. Vindhyachal-IV (2X500) 10. Indira Gandhi STPP. NTPC has formed JVs with BHEL and Bharat Forge Ltd. In line with the Corporate Plan. Sipat I (3 x 660) 3. Velour Stage-I Phase-II -JV with TNEB ( 1 x 500) 6.INTERNATIONAL FINANCING ON POWER PROJECTS Ash Business: NTPC has focused on the utilization of ash generated by its power stations to convert the challenge of ash disposal into an opportunity. Simhadri II Unit . Equipment Manufacturing: Enormous growth in power sector necessitates augmentation of power equipment manufacturing capacity. Power Distribution: ‗NTPC Electric Supply Company Ltd.IV( 500) 4.‘ (NESCL). Muzaffarpur Expansion (2x195) – JV with BSEB Chhattisgarh Andhra Pradesh Tamilnadu Tamilnadu Assam Maharashtra Uttar Pradesh Madhya Pradesh Bihar 1000 1980 500 1000 500 750 1000 1000 1000 390 13 . NESCL is actively engaged in ‗Rajiv Gandhi Gramin Vidyutikaran Yojana‘programme for rural electrification. a wholly owned subsidiary of NTPC.

It is a wholly owned subsidiary company of NTPC with the objective of making a foray into the business of distribution and supply of electrical energy. Barh I (3 X 660) Hydro 1. Pipavav Power Development Co. Singrauli CW Discharge(Small Hydro) Total 2. Barh II (2 X 660) 13. has dissociated itself from this company. PPDCL is under winding up. 2002. (NHL) The company was formed on December 12. as a sequel to reforms initiated in the power sector. as a wholly owned subsidiary company of NTPC with an objective to develop small and medium hydroelectric power projects of up to 250 MW. Koldam HEPP ( 4 x 200) 2. NTPC Hydro Ltd. Tapovan Vishnugad HEPP (4 x 130) 3. NTPC Vidyut Vyapar Nigam Ltd. to effectively utilize installed capacity and thus enable reduction in the cost of power. as a wholly owned subsidiary company of NTPC. Himachal Pradesh Uttarakhand Uttar Pradesh 800 520 8 14748 Bihar Bihar Bihar 1000 1320 1980 14 . 2002. The company‘s objective is to undertake sale and purchase of electric power. Pursuant to the decision of Gujarat Government. (NVVN) The company was formed on November 1. Ltd. 2002. (NESCL) The company was formed on August 21.4 Subsidiaries: NTPC Electric Supply Company Ltd. Nabinagar TPP-JV with Railways (4 x 250) 12. (PPDCL) A memorandum of understanding was signed between NTPC.INTERNATIONAL FINANCING ON POWER PROJECTS 11. Gujarat Power Corporation Limited (GPCL) and Gujarat Electricity Board (GEB) in 2004 for development of a 1000 MW thermal power project at Pipavav in Gujarat by forming a new joint venture company between NTPC and GPCL with 50:50 equity participation. NTPC Ltd.

The company was rechristened as ‗Kanti Bijlee Utpadan Nigam Limited‘ on April 10. (formerly known as Vaishali Power Generating Company Limited) To take over Muzaffarpur Thermal Power Station (2*110MW). NTPC has embarked upon an ambitious plan to attain a total installed capacity of 75. 2008.INTERNATIONAL FINANCING ON POWER PROJECTS Kanti Bijlee Utpadan Nigam Limited. 2008.000 MW of thermal generating capacity. a subsidiary company named ‗Vaishali Power Generating Company Limited (VPGCL)‘ was incorporated on September 6. such as. Commensurate with our country‘s growth challenges. having operations that match the global standards. Bharatiya Rail Bijlee Company Limited (BRBCL) A subsidiary of NTPC under the name of ‗Bharatiya Rail Bijlee Company Limited‘ was incorporated on November 22. Govt. 15 . Apart from this. 2. is the largest and one of the most efficient power companies in India. with a rich experience of engineering. The second unit has been successfully re-synchronized on October 17. NTPC has also adopted the Diversification Strategy in related business areas. construction and operation of over 30. Brownfield Projects. Joint Venture and Acquisition route. Services. Coal Mining. of India respectively for setting up of four units of 250 MW each of coal based power plant at Nabinagar. 2007 with 74:26 equity contribution from NTPC and Ministry of Railways. Towards this end. 2006 with NTPC contributing 51% of equity and balance equity was contributed by Bihar State Electricity Board. Investment approval of the project was accorded in January.5Business Development: NTPC. This company was formed to renovate the existing unit and run the plant. NTPC has adopted a multi-pronged strategy such as Greenfield Projects. Bihar. Power Trading. Manufacturing to ensure robustness and growth of the company. 2007 after 4 years of being idle. Power Exchange. Renovation and modernization of the first unit is under progress.000 MW by 2017.

10 73.80 93.50 8.20 2.00 32.138.889.00 40.75 38.188.737.724.50 0.825.70 Mar '09 12 mths 8.30 26.10 Mar '10 12 mths 8.245.30 32.77 7.00 68.357.564.00 0.994.20 271.90 0.00 54.415.749.277.40 634.797.30 15.478.717.00 27.00 50.70 22.50 8.00 58.924.344.24 111.68 33.368.807.50 62.20 25.584.90 Mar '07 12 mths evalua .20 14.90 27.598.40 7.572.00 6.36 Mar '11 12 mths Application Of Funds Gross Block Less: Accum.70 19.983.70 2.20 50.80 34.10 37.10 15.245.60 25.00 Mar '08 12 mths 8.347.064.079.290.384.583.00 63.937.00 101.519.94 33.31 326.093.70 26.525.575.10 6.088.661.510.10 13.10 3.40 7.252.512.19 39.90 8.00 0.70 473.00 48.40 9.567.458.00 29.479.30 0.50 0.663.80 7.969.90 28.50 8.50 8.274.70 12.00 46.30 16.079.60 81.351.245.66 0.267.245.781.50 0.245.84 3.50 3.604.10 15.60 17.80 53.141.999.353.460.826.962.34 11.00 16. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits 72.10 4.021.40 3.60 0.094.90 13.245.20 25.00 0.243.982.675.00 0.60 14.50 0.910.10 9.245.00 10.875.245.20 1.404.267.441.6Balance Sheet: Mar '11 12 mths Sources Of Funds 8.56 43.50 25.46 0.00 55.131.00 0.60 8.46 8.596.84 12.099.858.40 0.80 32.648.936.80 7.12 7.639.INTERNATIONAL FINANCING ON POWER PROJECTS 2.20 34.521.70 6.478.00 60.190.50 16 Mar '10 12 mths Mar '09 12 mths Mar '08 12 mths Mar '07 12 mths Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net worth Secured Loans Unsecured Loans Total Debt Total Liabilities 8.30 750.12 9.92 66.245.30 2.651.245.314.633.562.

30 10.40 0.55 2.00 29.36 33.00 10.93 0.00 101.848.527.688.00 5.80 0.40 7.20 71.280.572.10 40. Opportunities: 17 .70 20. Excellent work Culture.30 0.618.737.396.70 0.94 30. Weaknesses: • • High employee turnover.070.20 3.30 19.28 30.730.562.439.94 2.81 25.360. Numerous Training Courses for the employees.7 SWOT analysis of NTPC Strengths: • • • • • • • • Core Team of expert professionals.227.60 0.80 65.80 58.00 7. Sound and state of the art Physical Infrastructure.521. Still some departments work in isolation. Young and Dynamic workforce Aggressive toward development.249.361.083.909.31 13.50 10.00 5.30 0. Responsive Governance (Across the Board: Cooperation across management).20 5.945.55 30.548.422.00 77.29 82.967.90 25.50 10.702.458.00 17.00 111.218.236.720. Low Operating Costs.00 81.815.858.925.896.00 7.156.50 15.70 66.86 21.80 0.80 3. Loans & Advances Deferred Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs) 35.80 0.60 12.79 0.675.INTERNATIONAL FINANCING ON POWER PROJECTS Total CA.00 93.044.00 73.

INTERNATIONAL FINANCING ON POWER PROJECTS • • • • • To compete economically with anybody in the country as well as in the world. 18 . Take advantage of technological revolution Mergers and acquisitions. policies Manpower shortage. Change in Govt. Fuel availability. Threats: • • • • High competition from other companies. Great numbers of projects are coming up with the organization. Open access implementation.

OBJECTIVE OF THE PROJECT To know about role of the international financial institution or multinational development bank like ADB. and RELIANCE POWER etc. IFC etc. 19 . WORLD BANK. There are various questions regarding international financing for Indian power projects such as: How much amount of the foreign currencies invested in Indian power projects? How international financing is done for power projects? How foreign currencies are converted into the local currency? How application of international finance takes place for financing the power projects? Which factor distinguishes between domestic finance & international finance? On what condition lenders (multinational development banks) are ready to invest for Indian power projects? Which types of loan provided by lenders to the borrower for financing the power projects? What is the loan agreement between lenders & borrower? Why NTPC is better than other domestic companies like TATA POWER.? What is the role of regulatory framework for international financing on infrastructure (power) projects? What are the risks for the foreign investors to finance the projects? Attempts are made to answer these questions in this report.INTERNATIONAL FINANCING ON POWER PROJECTS 3. for the financing in power projects. ADANI POWER.

which are better for investment in power projects. and event of default. It includes commitment charges. India has huge amount of target installed capacity & NTPC has different target capacity on different plans. Significance of the project consists to determine the exchange rate of two currencies of two different countries. Significance of the projects consists External commercial borrowing guidelines of Reserve bank of India.INTERNATIONAL FINANCING ON POWER PROJECTS 4. 20 . Significance of the project helps to the borrower for at how much interest rate to take loan. SIGNIFICANCE OF THE PROJECT A major significance of project is to help the borrower for choosing the multinational development banks. Risk of the investor would be reduced then proper financing work place. International financing does takes place due to low interest rate. International financing does by competitive bidding process. Significance of the projects consist NTPC is superior to other domestic companies like TATA POWER.so that NTPC wants to reach at its own target value with the help of internationally finance. cancelation and suspensions. It means all the conditions of borrower as well as lenders are satisfied to both of them. SCOPE OF THE PROJECT International financial institution or multinational development banks are investing in power projects due to government budgetary constraints. The loan given by lenders wants to give a certain maturity date to the borrower for return back currencies to him. RELIANCE POWER. ADANI POWER. repayment and prepayment charges. disbursement fee. 5. Significance of the projects also lays in the fact the loan agreement between the borrower & lenders are relevant or not.

21 . issue price of debt. 137245. The formula for WACC is given below:WACC=Kd*(1-T)*(D/D+E) + Ke*(E/D+E) Kd=cost of debt T=corporate Tax D=Debt value E=Equity value Ke=cost of equity In the research methodology conversion of External Commercial borrowing into equity occurs. For calculation of weighted average of cost of capital we must have interest rate (coupon rate).INTERNATIONAL FINANCING ON POWER PROJECTS 6. corporate tax. 21852 crore respectively. RELIANCE POWER are 18726 crore. Determine the whole net charge (interest charge) for all projects of NTPC provided loan from multinational development banks.54 crore (BSE). The Foreign Exchange Rate Variation (FERV) comes from Repayment value of Loan. There are huge difference shows NTPC is better than ADANI POWER & RELIANCE POWER. earning per share value. In the research methodology of the project consider why NTPC is better than other domestic companies? The Market Cap value of NTPC is 137039. market price of ordinary share and weight of equity as well as debt. RESEARCH METHODOLOGY OF THE PROJECT In the research methodology of the project determine the foreign exchange rate variation for different projects of NTPC. Determine the weighted average of a particular multinational development Bank (KFW Bank) for different projects of NTPC. All the guidelines of ECB consider in the project report.68 crore (NSE) and the Market Cap value of ADANI POWER.

the World Bank Group and Asian Development Bank are the two most important for our study. Export Import Bank and the Japan Bank for International Cooperation (JBIC). including the Inter-American Development Bank (IDB).The largest ECAs among the 30 member nations of the OECD include the U. Economic credit agencies (ECA). the African Development Bank (AFDB).1.1: International Financiers of Coal fired plants EDF identified $37.04 billion in public international financing for some 88 new coal plants and expansions and life extensions of existing plants since 1994. Multilateral developments banks (MDB) and 2. but there are several others. the European Bank for Reconstruction and Development (EBRD). 22 . Table7. INTRODUCTION Public international finance is dominated by two kinds of institutions: .S.INTERNATIONAL FINANCING ON POWER PROJECTS 7. Among the MDBs. and the European Investment Bank (EIB).

315 billion and $3.Capacity Addition Breakup (XIth) power plant Figure7. Their financial commitments total $5. World Bank Group and the Asian Development Bank are the second and third largest single public financing institutions for the expansion of coal-fired power plants since 1994. respectively. Table7.INTERNATIONAL FINANCING ON POWER PROJECTS United States Export-Import Bank (EXIM) and Overseas Private Investment Corporation (OPIC).164 billion for 19 different coal-fired projects. with some $4.2: .623 billion.1: XIth plan Capacity Addition Targets & Achievement 23 .

INTERNATIONAL FINANCING ON POWER PROJECTS Figure7.2: Capacity Addition Growth in plan wise manner Figure7.3: Capacity Addition Private Sector 24 .

043 78.380 4% 3.491 15.783 15.482 3.301 11.840 23.INTERNATIONAL FINANCING ON POWER PROJECTS Table7.654 3.552 56.380 36.3: Financial Closure Scenario for Private Capacity as per 11th plan Table7.4: Investment Source / Sector Central State Private Total % age Hydro (MW) 8.693 76% 3.4: Investment in Power Sector 25 .874 26.700 100% 47% 34% 19% 100% Thermal (MW) Nuclear (MW) Total % age Figure7.627 20% 24.

INTERNATIONAL FINANCING ON POWER PROJECTS Figure7.5: Investment targets by Government 26 .

and how these affect international trade. It includes the study of futures. ¥) to the United States dollar (USD. Forward rate is the rate of exchange applicable for delivery of foreign exchange at a future date. Interest swap involve exchange of interest obligations between two parties.INTERNATIONAL FINANCING ON POWER PROJECTS 8. 27 . KEY TERM OF INTERNATIONAL FINANCE International finance is the branch of economics that studies the dynamics of exchange rates. Forward rate premium foreign currency is at premium when its forward rate is higher than spot rate. $) means that JPY 91 is worth the same as USD 1. foreign investment. Arbitrage is an act of buying currency in one market at a lower price and selling it in another price resulting in equilibrium in exchange rates of different currencies. Currency swap involve two parties who agree to pay each other‘s debt obligation denominated in different currencies. Cross rate is the rate of exchange of two currencies on the basis of exchange quotes of other pairs of currencies. It also studies international projects. Exchange rates (also known as the foreign-exchange rate or FX rate) between two currencies specify how much one currency is worth in terms of the other. goods. and services across international borders or territories. options and currency swaps. Spot rate is the rate of exchange of the day on which the transaction has taken place and of the days the transaction is executed. For example an exchange rate of 91 Japanese yen (JPY. Forward rate discount foreign currency is at discount when its spot rate is higher than the forward rate. International finance is a branch of international economics. and trade deficits. international investments and capital flows. It is the value of a foreign nation‘s currency in terms of the home nation‘s currency. International trade is exchange of capital.

Interest rate parity theory is a theory according to which the discount/premium of one currency in relation to another reflects the interest differentials between them. 28 . Purchasing power parity (PPP) theory is a theory of long-term equilibrium exchange rates based on relative price levels of two countries. It is also known as a three-point arbitrage. costs.INTERNATIONAL FINANCING ON POWER PROJECTS Geographical arbitrage is the buying of foreign currency from a foreign exchange market where it is cheaper and selling in another foreign exchange market where it is costly. as well as financial transfers. services. Triangular arbitrage involves three foreign currencies involving three different foreign exchange markets. Foreign exchange risk is the possibility of loss on account of unfavorable movement in foreign exchange rates. and financial capital. Balance of payments (BOP) sheet is an accounting record of all monetary transactions between a country and the rest of the world. International Fisher effect states that the nominal interest rate differential must be equal to the expected inflation rate differential in two countries. These transactions include payments for the country's exports and imports of goods. and cash flows . Transaction exposure involves gain/loss arising out of the various types of transactions that require settlement in a foreign currency. Operating exposure has impact on firm‘s future operating revenue. Translation exposure results from the need to translate foreign currency assets/liabilities into local currency at the time of finalizing accounts. Economic exposure implies change in the value of a company that accompanies an anticipated change in exchange rates.

at a predetermined exchange conversion rate is known as forward rate.INTERNATIONAL FINANCING ON POWER PROJECTS Foreign exchange risk management (FERM)-internal techniques:1. 5. Futures contract is a standardized agreement to buy or sell a pre-specified amount of foreign currency in the future market at some specified future date between the parties to the contract. 2. Currency option is a financial instrument that provides its holder a right but no obligation to buy or sell a pre-specified amount of foreign currency at a pre-determined rate in the future. normally at a specific future date . Lagging implies delaying receipts from the foreign currency designated receivables whose currencies are likely to appreciate/strengthen and delaying foreign currency designated payables whose currencies are likely to depreciate/devalue/weaken. Foreign exchange risk management(FERM)-external techniques:1. Call option:-The holder has right to buy/call a specific currency at a specific price on a specific period of time. 2. The steps involved are as follows:29 . Forward contracts are widely used by business firms to hedge against volatile/ adverse exchange market. Business firms enter into a forward contract to buy or sell foreign currency in exchange for home currency. Netting:-Foreign exchange risk exposure of such companies can be substantially reduced if foreign designated receivables and payments among them are settled on the net balance basis is known as netting. 3. Put option:-The holder has right to sell a specified amount of currency at a pre-fixed price on a specified date. Money market operations:-It serves an important hedging function in that uncertainty is resolved regarding the amount to be paid. 3. Leading implies collection from designated debtor‘s expeditiously foreign currency before they are due (when home currency is expected to strengthen) and to initiate lead to pay foreign currency designated creditors before their due date of payment (when depreciation/devaluation of the home currency is apprehended). 6. 4.

Step 2-From an authorized dealer (Bank) ascertain the spot exchange rate at which it is selling the required foreign currency in exchange for home currency. at the prevailing interest rate. Step 5-As per steps 3 and 4. Financial diversification Incremental cash flow of the investment should be discounted at an opportunity cost of capital appropriate to the risk of investment. Step 4. Comparative cost (2). to be paid on a specified date (3-4 months) from now. The quantum of borrowing should be in such a manner that can make the required foreign currency sums available on the date of payment (3-4 months). the required amount of foreign currency to be purchased can be determined.INTERNATIONAL FINANCING ON POWER PROJECTS Step 1-Determine the amount required in foreign currency. Multinational capital budgeting decision:The major motivating factor in favour of foreign investments:(1). operating cash flow(OCF)cash flow provided by operations or cash flow from operating activities. 30 . it is to be invested in forex money market to yield interest in the desired foreign currency. Incremental cash inflows the foreign investment project is expected to yield during its projected economic useful life. Incremental cash outflows to undertake foreign investment decision are to be measured. refers to the amount of cash a company generates from the revenues it brings in. Taxation (3). The investment should be accepted if the NPV is positive.The borrowed funds are to be used to buy the required foreign currency from the forex spot market. once purchased. Step 3-Borrow home currency from the money market.

3. Investment Evaluation The basic steps involved in evaluation of a project are:1. Apply NPV or IRR techniques to determine the acceptability or priority ranking of potential projects. preferred stockholders. convertible security holders. Identify the appropriate discount rate for determining the present value of the expected cash flows. It should also allow for cash available to pay off the company's short term debt. They include equity holders. debt holders. Net Free Cash Flow = Operation Cash flow – Capital Expenses to keep current level of operation – dividends – Current Portion of long term debt – Depreciation.INTERNATIONAL FINANCING ON POWER PROJECTS excluding costs associated with long-term investment on capital items or investment in securities. Determine net investment outlay. It should also take into account any dividends that the company means to pay. Free cash flow (NCF) is cash flow available for distribution among all the securities holders of an organization. The International Financial Reporting Standards defines operating cash flow as cash generated from operations less taxation and interest paid. Estimate net cash flows to be derived from the project over time. Cannibalization implies lost sales of existing products of a multinational company on account of proposed foreign investment. 2. Sales creation implies increased sales on account of proposed foreign investment. investment income received and less dividends paid gives rise to operating cash flows. including an estimate of salvage value. 31 . 4.

6. Knock-on effects of overseas investment projects on other operations elsewhere. 32 .INTERNATIONAL FINANCING ON POWER PROJECTS Some of the factors unique to capital budgeting for MNCs are: 1. Application of different tax rates in the country of the project and in the parent's country. 3. Restrictions on full remittance of cash flows from foreign projects. Lost exports. 7. 11. Difficulty in estimating terminal value of foreign projects. Conversion of cash flows from foreign projects into the currency of the parent firm. Amenities and concessions granted by host country. 4. Political risk involved in foreign investment. Exchange Rate fluctuations. 8. 2. 9. 5. Differing rates of national inflation. Benefits of international diversification to the shareholders of parent firm. 10.

there is no way that we can analyze international financing and investment opportunities without an understanding of the impact of foreign exchange rates upon the basic model of financial management. A domestic company takes up a project for investment only when the net present value of cash flows is positive and it shapes the working capital policy in a way that maximizes profitability and ensures desired liquidity. cultural and tax environments (b) They operate across and within varied ranges of product and factor markets which vary in regard to competition and efficiency. international finance has a wider scope than domestic corporate finance and it is designed to cope with greater range of complexities than the domestic finance. aim at minimizing the overall cost of capital and providing optimum liquidity. However. It is not different in case of MNCs. In domestic arena. (d) They have easy access not only to varying domestic capital markets but also to unregulated international capital markets which differ in terms of efficiency and competitiveness.INTERNATIONAL FINANCING ON POWER PROJECTS 9. the financing decisions. political. in respect of whether a domestic or an international company. legal. Domestic financial management is concerned with the costs of financing sources and the payoffs from investment. DIFFERENCE BETWEEN DOMESTIC FINANCE & INTERNATIONAL FINANCE International finance is to a great extent. 33 . movements in exchange rates are substantially ignored. (c) They trade in a large number of currencies as a result of which their dependence on the foreign exchange market is quite substantial. similar to domestic corporate finance. Again. The reasons are as follows:(a) The MNCs operate in different economic. But In case of international financial management.

IFC THE WORLD BANK The International Bank for Reconstruction and Development (IBRD). Since the IMF was designed to provide temporary assistance in correcting the balance of payments difficulties.INTERNATIONAL FINANCING ON POWER PROJECTS 10. To promote the long-term balanced growth of international trade and the maintenance of equilibrium in balances of payments by encouraging international investment for the development of the productive resources of members. was established at the same time as the International Monetary Fund (IMF) to tackle the problem of international investment. The World Bank (IBRD) is an inter-governmental institution. Thus.ROLE OF WORLD BANK. 3. only nations that were members of the IMF could be members of the World Bank. To promote private foreign investment by means of guarantee of participation in loans and other investments made by private investors and when private capital is not available on reasonable terms. whose capital stock is entirely owned by its member governments. To assist in the reconstruction and development of the territories of its members by facilitating the investment of capital for productive purposes. ADB. IBRD was established for promoting long-term investment loans on reasonable terms. 34 . FUNCTIONS: 1. 2. this restriction on membership was subsequently relaxed. corporate in form. Initially. to make loans for productive purposes out of its own resources or from funds borrowed by it. better known as the World Bank. an institution was also needed to assist long-term investment purposes.

He is assisted by vicepresident and professional and non-professional staff members. will be dealt with first. The regional members carry over two-thirds of the votes.INTERNATIONAL FINANCING ON POWER PROJECTS 4. In practices. Presently. The chairman of the board of director is the president of the ADB. A little consideration will show that the objectives of the IMF and IBRD are complementary. The formalities were completed by mid-1966 and it started functioning in December 1966. decisions are taken by consensus. Both serve as lending institutions. The Bank considers its role to be a marginal one. Every member country has one basic vote plus proportional votes depending upon the number of shares held in the capital structure. 35 . large and small alike. To arrange loans made or guaranteed by it in relation to international loans through other channels so that more useful and urgent projects. Its membership was open to the regional countries and the non-regional developed countries from where resources were to be obtained. It appears that the World Bank was created to promote and not to replace private foreign investment. Both aim at promoting the balanced growth of international trade. it has 57 members---41 from the region and 16 from outside. although there is provision for voting. 1963. the IMF for short-term and the IBRD for long-term capital. Both aim at increasing the level of national income and standard of living of the member nations. ADB (ASIAN DEVELOPMENT BANK) ADB had started in 22nd august. to supplement and assist foreign investment in the member countries.

Provides technical assistance for preparing and carrying out development projects and programmer and advisory services. JSF was established in 1988 by way of contribution from japan for financing or co-financing on a grant basis the technical assistance projects and the private sector projects through equity investment. The ADB: 1. TASF is meant for financing the technical assistance operations. ADB provides the following financial and technical assistance for economic development of developing member countries (DMC). the Technical Assistance Development Special Fund (TASF) and the Japan Special Fund (JSF). 2.INTERNATIONAL FINANCING ON POWER PROJECTS The financial resource base is divided into two components. replenishments from member countries. and income from investment. One is the ordinary capital resources (OCR) comprising equity and borrowings. there are three special funds namely the Asian Development Fund (ADF) . It created out of income from the ordinary lending operation. Apart from OCR . direct voluntary contributions. FUNCTION Being a regional development bank. The other is the special funds made up largely of contributions from member countries and specially meant for concessional lending and technical assistance. 36 . ADF is replenished by member countries to finance the concessional lending to poorer members and the replenishment is authorized from time to time by a resolution of the board of governor. Makes loan and equity investments.

During 1990s the size of borrowing expanded fast. Helps mobilize additional resources within the region and helps attract investment from outside it. The president of the World Bank is the ex-officio president of the IFC. It presents a mix of equity capital and borrowed funds. dividend from equity investment. The IFC started borrowing in 1965 in order to finance its lending activities but only from the IBRD. This means that the Board of Governor is the apex body. The resources base of the IFC is similar to that of the IBRD. and income from the sale of securities. the earning of the IFC too makes up its resource pool. 37 . The president is assisted by the executive vice president who is in turn assisted by a large number of professional and non-professional staff. Apart from borrowings. IFC (INTRENATIONAL FINANCE CORPORATION) Since IFC is an institution of the World Bank group. and 4. In 1984 it began borrowing from the international capital market. etc. The earning comes from interest and financial fees. Assist regional and sub-regional schemes for the sake of promotion of regional economic cooperation. its organizational set-up is similar to that of the World Bank. The Board of Director implements the policies framed by the Board of Governors. service fees.INTERNATIONAL FINANCING ON POWER PROJECTS 3.

Long-term loans are made either on project cost basis or on corporate-finance basis. technical assistance and management. Such loans are known as B-loans. it seeks out commercial banks and other financial institutions to join in loan syndication and parallel financing. 38 . Those loans that are written against IFC‘s own account are known as A-loans. IFC provides loans and makes equity and quasi-equity investment. The loans are mostly direct loans. and preferred stock and income notes. IFC‘s Risk Management Services enable firms to access the derivative markets to hedge their exchange rate exposure or interest rate exposure. Unlike IBRD loans. leasing companies or financial institutions. Quasi-equity investment includes subordinated loans. This means that it extends not only financial and technical assistance. these loans do not require government guarantee. but are provided also through financial intermediaries like banks. In case where IFC‘s own funds do not permit making big loans. although it can be extended to 20 years and the grace period can go up to 4 years.INTERNATIONAL FINANCING ON POWER PROJECTS FUNCTION The IFC supplements the financing activities of the World Bank. convertible debt instruments. Maturity ranges normally between 7 and 12 years. It seeks to achieve the objectives through providing and bringing together finance. but also provides equity capital.

INTERNATIONAL FINANCING ON POWER PROJECTS

The Foreign Investment Advisory Service (FIAS) is being operated in collaboration with Multilateral Investment Guarantee Agency (MIGA) to provide technical advice to member countries on how to formulate policies and programs so as to attract foreign investment.

The Corporation collaborates also with the United Nations Development Program for technical assistance.

39

INTERNATIONAL FINANCING ON POWER PROJECTS
11. TYPES OF LOAN
11.1 Investment loans: - Investment loan have a long-term focus (5 to 10 years), and finance goods, works and services in support of economic and social development projects in a broad range of sectors. Investment loans finance a wide range of activities aimed at creating the physical and social infrastructure necessary for poverty reduction and sustainable development. The important lending instruments are:-SIL, SIM, APL, LIL, TAL, FIL, ERL.

11.2Adjustment loans: - Adjustment loan have a short-term focus (1 to 3 years), and provide quick-disbursing external financing to support policy and institutional reforms. Eligibility for an adjustment loan also requires agreement on monitor able policy and institutional reform actions, and satisfactory macroeconomic management.

Coordination with the IMF is an essential part of the preparation of an adjustment loan. The important lending instruments are:-SAL, SECAL, PSAL, SSAL, RIL, and DRL. 11.3Specific Investment Loan Specific investment loans (SILs) support the creation, rehabilitation, and maintenance of economic, social, and institutional infrastructure. In addition, SILs may finance consultant services and management and training programs.

The SIL is a flexible lending instrument appropriate for a broad range of projects. SILs help to ensure the technical, financial, economic, environmental, and institutional Viability of a specific investment. They also support the reform of policies that affect the productivity of the investment. 11.4Sector Investment and Maintenance Loan Sector investment and maintenance loans (SIMs) focus on public expenditure programs in particular sectors. They aim to bring sector expenditures, policies, and performance in line with a country‘s development priorities by helping to create an appropriate balance among new capital investments, rehabilitation, reconstruction, and maintenance.

40

INTERNATIONAL FINANCING ON POWER PROJECTS
They also help the borrower develop the institutional capacity to plan, implement, and monitor expenditure or investment program.

The SIM is most appropriate where a sector expenditure program needs extensive coordination, particularly if the program involves a large share of donor-financed investments. Therefore, SIMs typically involves coordinated efforts among the multilateral and bilateral donors providing assistance to the sector. 11.5Adaptable Program Loan Adaptable program loans (APLs) provide phased support for long-term development programs. They involve a series of loans that build on the lessons learned from the previous loan(s) in the series.

An APL involves agreement on (1)The phased long-term development program supported by the loan, (2)Sector policies relevant to the phase being supported, and (3)Priorities for sector investments and recurrent expenditures.

They can be used to support a phased program of sector restructuring, or systemic reform in the power, water, health, education, and natural resource management sectors, where time is required to build consensus and convince diverse actors of the benefits of politically and Economically difficult reforms. 11.6Learning and Innovation Loan The learning and innovation loan (LIL) supports small pilot-type investment and capacitybuilding projects that, if successful, could lead to larger projects that would mainstream the learning and results of the LIL.

LILs do not exceed $5 million, and are normally implemented over 2 to 3 years—a much shorter period than most Bank investment loans. All LILs include an effective monitoring and evaluation system to capture lessons learned.

41

and maintenance of investments. strategies. It may focus on organizational arrangements.8Financial Intermediary Loan Financial intermediary loans (FILs) provide long-term resources to local financial institutions to finance real sector investment needs.INTERNATIONAL FINANCING ON POWER PROJECTS 11. and technical. or Natural disaster—that seriously disrupts a borrower‘s economy. and to develop disaster-resilient technology and early warning systems to prevent or 42 . implementation. 11. civil disturbance. or financial resources in key agencies. promote the operational efficiency of those institutions in a competitive environment. They also build capacity related to public sector reform and to the preparation.7Technical Assistance Loan The technical assistance loan (TAL) is used to build institutional capacity in the borrower country. and reforms that promote economic and social development. They are also used to strengthen the management and implementation of reconstruction efforts. 11. TALs are used to build capacity in entities directly concerned with implementing policies.9Emergency Recovery Loan Emergency recovery loans (ERLs) support the restoration of assets and production Levels immediately after an extraordinary event—such as war. The financial institutions assume credit risk on each subproject. and promote private investment. improve the terms of credit to enterprises and households. physical. FILs help to develop sound financial sector policies and institutions. TALs often complement investment or adjustment operations by supporting specific tasks related to their preparation or implementation. staffing methods.

PSALs respond to country needs for Bank financing and advice in support of structural and social reforms that involve continuous. 11.12Programmatic Structural Adjustment Loan The programmatic structural adjustment loan (PSAL) is provided in the context of a multiyear framework of phased support for a medium-term government program of policy reforms and institution building. and sustainable balance of payments over the medium and long term. and sector expenditure programs. They finance investment and productive activities. private sector development. and social safety nets. SALs typically focus on major macroeconomic and structural issues that cut across sectors. institutional capability. such as trade policy. a SIL is usually more appropriate. 11. social.10Structural Adjustment Loan The structural adjustment loan (SAL) supports reforms that promote growth. ERLs focus on the rapid reconstruction of economic. efficient use of resources. SECALs focus on major sectorial issues such as the incentive and regulatory Frameworks for private sector development. For recurring events such as annual flooding. 43 . or for a slow-onset disaster such as drought.11Sector Adjustment Loan The sector adjustment loan (SECAL) supports policy changes and institutional reforms in a specific sector.INTERNATIONAL FINANCING ON POWER PROJECTS Mitigate the impact of future emergencies. public sector management. 11. resource mobilization. normally 2 to 3 years. incremental policy changes and institution building over several years. rather than relief or consumption. and physical systems within a limited period.

aimed at strengthening public expenditure management and improving governance. There are no waivers of interest or commitment charges.14Rehabilitation Loan The rehabilitation loan (RIL) supports government policy reform programs aimed at creating an environment conducive to private sector investment. and with exceptional external financing needs.INTERNATIONAL FINANCING ON POWER PROJECTS The focus is on step-by-step capacity building and reform. 11. and a minimum loan spread of 400 basis points over USD LIBOR equivalent. where foreign exchange is required for urgent rehabilitation of key infrastructure and productive facilities. SSALs have different terms than other Bank loans. They carry a 5-year maturity with a 3-year grace period. The focus is on rationalizing the country‘s external commercial bank debt. These loans help countries to prevent a crisis or. and public service delivery. typically in the public sector. or already in crisis. if one occur.13Special Structural Adjustment Loan The special sector structural adjustment loan (SSAL) supports structural and social reforms by creditworthy borrowers approaching a possible crisis. 11. as part of a medium-term financing plan in support of sustainable growth. resource allocation. 11. The focus is on key short-term macroeconomic and sector policy reforms needed to reverse declines in infrastructure capacity and productive assets. by either converting it to lower-interest instruments or buying it back at a discount.15Debt Reduction Loan The debt reduction loan (DRL) helps eligible highly indebted countries reduce commercial debt and debt service to a manageable level. 44 . to mitigate its adverse economic and social impacts.

45 .01 Definitions "Assets" means all types of assets including property. whether a legal person or not. “Co-financing” means any financing specified in the Loan Agreement to be provided for the Project by a financier. "Closing Date" means the date specified in the Loan Agreement or such other later date as shall be agreed upon in writing among the Bank. the Special Drawing Right of the International Monetary Fund. "Currency of a Country" means the coin or currency which is legal tender in that country. If more than one such entity is designated in the Loan Agreement. revenue and claims of any kind.LOAN AGREEMENT 12. "Date of the Loan Agreement” means the date specified in the Loan Agreement. "Currency" includes the currency of a country. as amended from time to time. "Executing Agency" means the entity.INTERNATIONAL FINANCING ON POWER PROJECTS 12. "Category of Expenditure" means any category of goods.1. "Borrower" means the party to the Loan Agreement to whom the Loan is made. works and services of the Project to be financed from the resources of the Loan. the Borrower after which the Bank may terminate the right of the Borrower to request disbursements of the Loan.1 ARTICLE I DEFINITIONS SECTION 1. "Bank Agreement" means the Agreement Establishing the African Development Bank adopted on the 4th day of August 1963. an ―Executing Agency‖ refers separately to each such entity. "Bank" means any Lender who gives the loan to the Borrower like Lender (African Development Bank). which is designated for the implementation of the Project under the Loan Agreement. "Date of Entry into Force" means the date on which the Loan Agreement shall enter into force. the Unit of Account of the Bank and any other unit of account which represents a debt service obligation of the Bank to the extent of such obligation.

"Loan Agreement" means the agreement entered into between the Bank and the Borrower providing for the Loan. “Hedging Agreement” means any derivative agreement entered into between the Bank and the Borrower in connection to any financial obligations to the Bank related to a loan. to guarantee the Loan. "Loan" means the maximum amount of the resources granted by the Bank as specified in the Loan Agreement. "Member State" means a member State of the Bank. and services thereunder. and the payment obligations thereunder. works. as such agreement may be amended from time to time. "Lien" means any security provided for the payment of a debt. "Loan Savings" means any undisbursed amount of the Loan available (i) when the Project has been fully terminated without any significant change from the initial Project description or its design and disbursements have been effected in respect of all goods. "Guarantor" means the party to the Guarantee Agreement entered into with the Bank. pledges. 46 . charges. "Guarantee Agreement" means the agreement entered into between the Bank and the Guarantor.INTERNATIONAL FINANCING ON POWER PROJECTS "Fund" means the African Development Fund. works and services and provisions made for outstanding payments. "Loan Currency" means the Currency or Currencies selected by the Borrower for the Loan. "Loan Account" means the account opened by the Bank on its books in the name of the Borrower to record the Loan as well as disbursements and repayments of the Loan. privileges and priorities of any kind. "Interest Period" means the interest period defined in the Loan Agreement. including mortgages. as such agreement may be amended from time to time. or (ii) when the Project nearing completion is progressing satisfactorily according to the implementation schedule with arrangements finalized for procurement of all goods.

the Commitment Charge shall accrue until (i) the date on which such amount is disbursed to the Borrower or (ii) the date on which such amount is cancelled or (iii) the Closing Date. as described in the Loan Agreement and as the description thereof may be amended from time to time by agreement between the Bank and the Borrower. "Public Entity" means any Legal Entity in which a Regional Member State and/or its political or administrative sub-division hold more than fifty per cent (50%) of the shares and/or of the voting rights.COMMITMENT CHARGE . "Taxes" means all taxes. "Special Commitment" means any Special Commitment entered into by the Bank.SPECIAL COMMITMENT CHARGE AND REPAYMENT SECTION 2. imposts. 12. as amended from time to time. With respect to any amount under the Loan.01 Loan Account The amount of the Loan shall be entered in the books of the Bank and such amount may be disbursed to the Borrower as provided in the Loan Agreement.1. or on such other date as the Bank shall from time to time determine. SECTION 2. The Commitment Charge shall be payable on each interest payment date commencing on the first interest payment date following the Date of Entry into Force. "Single Currency Loans" mean the lending products introduced by the Bank with effect from October 1. The commitment charge shall be 47 . fees and duties of any nature. 1997.02 Commitment Charge (a) The Bank may charge a Commitment Charge on terms and conditions to be provided in the Loan Agreement.INTERNATIONAL FINANCING ON POWER PROJECTS "Project" means the Project or Program for which the Loan is granted. whether in effect at the Date of the Loan Agreement imposed.2 ARTICLE II LOAN ACCOUNT . Such Commitment Charge shall begin to accrue 60 days from the Date of the Loan Agreement. levies. (b) The Borrower shall pay the Commitment Charge on the undisbursed amount of the Loan at the rate specified in the Loan Agreement. whichever date comes first.

including. or up to the date of notification by the Bank of the cessation of the event which caused the application of the alternate interest rate. financial market disruption. This formula shall apply retroactively from the first day of the Interest Period during which this impossibility to compute the interest rate has been notified. but not limited to. interest and principal. as the case may be. 48 .INTERNATIONAL FINANCING ON POWER PROJECTS expressed in the Currency loaned. SECTION 2. other charges. all payments by the Borrower shall be applied. prepayment costs. Commitment Charge and other charges due under the Loan Agreement. (c) Any Commitment Charge as stated in paragraph (b) of this Section which has become due and payable during the provisional effectiveness of the Loan Agreement. the Bank determines that it has become impossible to calculate the interest rate in the manner agreed upon in the Loan Agreement. Special Commitment Charge. Special Commitment Charge. the Borrower shall have the right to prepay the Loan without thereby incurring any penalty or prepayment costs. the cancellation or the termination of the Loan Agreement. up to the total reimbursement of the principal of the Loan. prepayment costs.03 Interests (a) The Borrower shall pay interest at the rate specified in the Loan Agreement on the amount of the Loan disbursed and outstanding from time to time. in the following order: Commitment Charge. in order to decide on a substitution formula allowing the Bank to keep the same margin as the margin defined in the Loan Agreement. the Bank shall consult with the Borrower. (b) The Bank may establish an alternate interest rate which shall be applicable if for any reason. SECTION 2. shall remain due and payable to the Bank notwithstanding the non-entry into force. (c) In establishing such alternate interest rate. In such case. interests. Interest shall accrue from the respective dates on which such amounts are disbursed.04 Application of Payment Except as the Bank may otherwise decide.

06 Repayments and Prepayment (a) Except as provided in Section 3. Commitment Charge and other charges on the Loan shall be paid at such place(s) as the Bank shall indicate.08 Payments Falling Due on Public Holidays 49 . (c) The prepayment costs payable under paragraph (b) of this Section on prepayment of any maturity shall. unless otherwise specified by the Borrower in the prepayment notice. Special Commitment Charge and other charges. Special Commitment Charge. or (ii) the entire principal amount of any one or more maturities which. subject to the specific terms governing Single Currency Loans. SECTION 2. SECTION 2. (d) Each request for prepayment notified to the Bank by the Borrower in accordance with this Section shall be irrevocable and the amount to be prepaid shall automatically become due on the date accepted by the Bank. the Borrower shall repay the principal amount of the Loan which has been disbursed in accordance with the provisions of the Loan Agreement. SECTION 2. be an amount reasonably determined by the Bank to represent any cost to the Bank of redeploying the amount to be prepaid from the date of prepayment to the maturity date. prepayment costs. except as provided in Section 3. Commitment Charge. and any prepayment costs calculated in accordance with Section 2. in its sole discretion.05 Computations of Interest and Commitment Charge Interest and Commitment Charge shall be computed on a daily basis in accordance with the provisions of the Loan Agreement. as of a date acceptable to the Bank.INTERNATIONAL FINANCING ON POWER PROJECTS SECTION 2.04(e). and after giving not less than 45 days‘ notice to the Bank .04(d)(ii).06(c). The Borrower shall have the right to repay. shall be applied pro-rata to all outstanding Loan maturities. (b) Upon payment of all accrued interest. waive the requirement of payment of any prepayment costs. in advance of maturity: (i) the entire principal amount of the Loan then outstanding.07 Place of Payment The principal of interest. provided the Bank may.

execute and deliver to the Bank. Special Commitment Charge. the Borrower shall.1.3 ARTICLE III CURRENCY PROVISIONS SECTION3. 12.01.10 Restrictions The repayment of the principal as well as the payment of interest. regulations. SECTION 2. SECTION 2. shall be considered made or fulfilled if it is affected on the first working day thereafter. if necessary. representing the obligation of the Borrower to repay the principal of the Loan together with interest. Commitment Charge and other charges. Currencies in which Disbursement is to be made (a) Subject to the Bank's right of Currency substitution in accordance with Section 3. in such form as the Bank shall prescribe. within the specified period. Special Commitment Charge and other charges relating to the Loan shall not be hindered by any restrictions.INTERNATIONAL FINANCING ON POWER PROJECTS Any payment or other obligation which is due under the Loan Agreement to be affected on a non-working day or a public holiday.04. the Bank will. (b) In the case of expenditures incurred in a Currency other than the Loan Currency. if the Borrower requests payment in the Currency of the expenditures. without any penalty or additional costs to the Borrower. provided such expenditures are in readily available Currency exchange such Currency in such manner as the Bank may deem appropriate. prepayment costs. controls of any kind imposed under the legislation of the Borrower. by the Guarantor. 50 . disbursements from the Loan Account shall be made in the Loan Currency in an amount equivalent to the expenditures to be financed out of the proceeds of the Loan. according to the relevant local law. promissory notes or other negotiable instruments. guaranteed.09 Promissory Notes At the request of the Bank. The costs of such Currency exchange shall be communicated to the Borrower. The equivalent disbursement amount shall be determined by the Bank including the exchange costs that would have been incurred by the Bank in using the Loan Currency to meet the request.

Currencies in which Payments to the Bank are Payable (a) Except as provided in Section 3.02 (b). 51 . the Loan Account shall be divided into multiple sub-accounts. interest. repayment of principal and payment of prepayment costs. (b) If the Borrower so requests. Each sub-account shall record the equivalent as of the date of disbursement and repayment in the respective Loan Currency of the amounts in various Currencies disbursed or repaid. SECTION3.04(g). acting on behalf of the Borrower. Commitment Charge and other charges shall be made in the Loan Currency. Special Commitment Charge.INTERNATIONAL FINANCING ON POWER PROJECTS SECTION 3. (b) For loans made in several Currency tranches. All amounts so recorded shall be the equivalent in the Loan Currency of the Currency disbursed or repaid. and on such terms and conditions as the Bank shall determine. the Loan Account shall be maintained in the Loan Currency and shall record the equivalent as of the date of disbursement and repayment in the Loan Currency of the amounts in various Currencies disbursed and repaid under the Loan from time to time. upon timely payment by the Borrower of sufficient funds for that purpose in a Currency or Currencies acceptable to the Bank. Commitment Charge and other charges. purchase the Loan Currency for the purpose of the repayment of principal and payment of prepayment costs.03. that such repayment or payment shall be deemed to have been paid only when and to the extent that the Bank has received the payment in the Loan Currency. Special Commitment Charge. interest. then the equivalent in the Loan Currency of the amount of such other Currency paid by the Bank shall be recorded in the Loan Account instead. each one to be maintained in the Loan Currency of each tranche.02 Loan Account Currencies (a) Except as provided in Section 3. However. the Bank may. except that if the Bank has exchanged the Currency disbursed from another Currency in order to provide for such disbursement. except that if the Bank has exchanged the Currency disbursed with another Currency in order to provide for such disbursement then the equivalent of the amount of such other Currency paid by the Bank shall be recorded in the sub-account instead.

(ii) No prepayment costs shall be payable on prepayment of the Loan. prepayment costs. by notice to the Borrower. (e) The Bank may. has arisen under which the Bank is unable to provide the Loan Currency for purposes of funding Single Currency Loans.04 Temporary Currency Substitutions (a) If the Bank reasonably determines that an extraordinary situation. then the Bank shall promptly notify the Borrower of its inability to access or procure the Loan Currency after becoming aware of such inability. modify the principal amount of any one or more maturities of the Loan provided for in the Loan Agreement. (d) During the period of operation of the Currency substitution: (i) The substitute Currency shall be deemed to be the Loan Currency for purpose of Loan Agreement. maturing after the establishment of any such substitute Currency to reflect changes in value as provided for in Section 3. The Bank shall duly notify the Borrower of such interest rate. 52 . Commitment Charge and other charges shall be made in the Loan Currency and/or in such temporary substitute Currency as the Bank shall have selected. the Borrower may cancel the undisbursed portion of the Loan for which an agreement has not been reached as to the currency of substitution.04(d) (iv). (iii) Repayment of principal and payment of interest. (b) For each payment. Special Commitment Charge.INTERNATIONAL FINANCING ON POWER PROJECTS SECTION 3. (c) The interest rate applicable to Loan amounts disbursed in the substitute currency shall be the interest rate applicable to similar single currency loans in such substitute currency at the time of disbursement. whether factual or legal. (iv)The Bank shall reasonably determine the guiding principles for the conversion of amounts from the Loan Currency to the substitute Currency. If within 60 days following such notification the Bank and the Borrower cannot agree on a substitute Currency. the date of conversion between the Loan Currency and the substitute currency shall be the date of disbursement of the substitute currency.

The Bank shall notify the Borrower. SECTION 4.4 ARTICLE IV DISBURSEMENT OF THE LOAN SECTION 4. the Borrower shall deliver to the Bank a written request in such form.03 Requests for Disbursement or for Special Commitment If the Borrower seeks disbursement of any amount from the Loan Account the Bank to enter into a Special Commitment. SECTION 4. No disbursements shall be made: (a) on account of expenditures procured in violation of the Bank‘s procurement rules (b) subject to the terms of the Loan Agreement. to finance expenditures incurred prior to the Date of the Loan Agreement.05 Valuation of Currencies For the purposes of the Loan Agreement.1.02 Special Commitments by the Bank The Bank may. 53 . whenever it shall be necessary to determine the value of one Currency in terms of another Currency. such value shall be as reasonably determined by the Bank. in accordance with the provisions of the Loan Agreement provided that. (g) All funds disbursed in a substitute Currency shall be repaid in the substitute Currency.01 Disbursement of the Loan The Borrower shall be entitled to request from the Bank the disbursement of funds for amounts expended for purposes of the Project. 12.INTERNATIONAL FINANCING ON POWER PROJECTS (f) The Currency substitution shall be terminated as soon as practicable once the Bank becomes able to provide again the original Loan Currency. The Borrower shall pay a charge (special commitment charge) at the rate specified in the Loan Agreement. at the request of the Borrower and upon such terms and conditions as shall be agreed upon between the Bank and the Borrower enter into special commitments in writing to pay amounts to the Borrower or others in respect of expenditures to be financed out of the proceeds of the Loan notwithstanding any subsequent suspension or cancellation by the Bank or the Borrower. except with the consent of the Bank. Section 3.

or on the order of. at the request of the Borrower. the Borrower in accordance with the terms of the Loan Agreement.INTERNATIONAL FINANCING ON POWER PROJECTS and containing such statements. SECTION 4.06 Evidence of Authority to Sign Requests for Disbursement The Borrower shall provide the Bank with evidence of the authority of the person or persons authorized to sign requests for disbursement and the authenticated specimen signature(s) of any such persons 54 .04 Payments by the Bank The Loan funds disbursed shall be payable by the Bank to. (c) Loan Savings may be allocated in accordance with the policy of the Bank as determined from time to time. Requests for disbursement.05 Reallocation and Loan Savings (a) The Bank may. and in accordance with its policies as applicable from time to time. modify the allocation of expenditures of the Project to be financed from the Loan. including the documentation required pursuant to this Article. shall be made promptly and in conformity with the disbursement rules and procedures determined by the Bank from time to time. (b) The reallocation of the Loan funds from one Category of Expenditures to another or within the same Category of Expenditures shall not. SECTION 4. however be made if such reallocation would in the opinion of the Bank (i) compromise the execution of the Project (ii) substantially modify the nature or objectives of the Project. SECTION 4. undertakings and documents as the Bank shall reasonably request. agreements.

12. Unless the parties otherwise agree. the cancellation 55 . SECTION 4. SECTION 4. in accordance with its disbursement rules and procedures. or that such Tax is discriminatory or otherwise unreasonable. if the Bank at any time determines that the amount of any such Tax is excessive. The Bank shall notify the Borrower of the date of receipt of such notice and shall consult with the Borrower on the reasons for its request for cancellation. by notice to the Borrower. (b) For purposes of paragraph (a) of this Section. the Bank may. manufacture. as required to ensure consistency with such policy of the Bank.09 Treatments of Taxes If permitted by the Loan Agreement. cancel the whole or part of the Loan which has not been disbursed.5 ARTICLE V CANCELLATION AND SUSPENSION SECTION 5. works or consultancy services is subject to the Bank‘s policy of requiring economy and efficiency in the use of the proceeds of its loans.07Supporting Evidence The Borrower shall provide the Bank with such documents and other evidence as the Bank shall request in support of any request for disbursement. To that end.08. decline to finance any such amount. the use of any proceeds of the Loan to pay for Taxes levied by. Sufficiency of Requests and Documents Each request for disbursement and the accompanying documents and other evidence shall be sufficient in form and substance to satisfy the Bank that the Borrower is entitled to obtain the disbursement of the amount requested for and that the said amount is to be used only for the purposes specified in the Loan Agreement.INTERNATIONAL FINANCING ON POWER PROJECTS . the Member State in respect of the importation. except that the Borrower may not so cancel any amount of the Loan in respect of which the Bank has entered into a Special Commitment. the Borrower shall give 60 day notice to the Bank of its intention to cancel all or part of the Loan and its reasons for so doing. or in the territory of.1.01 Cancellations by the Borrower (a) The Borrower may by notice to and after consultation with the Bank. procurement or supply of any goods. SECTION4.

SECTION 5. the Bank determines that the Project objectives cannot be achieved. because of a failure by the Borrower to perform any of its obligations under such agreement with the Bank. interest. commitment charge or any other amount due to the Bank or the Fund: (i) under the Guarantee Agreement. suspend in whole or in part the right of the Borrower to request for and receive disbursements from the Loan Account: Payment Failure (a) The Borrower has failed to make payment when due of principal. commitment charge or any other amount due to the Bank: (i) under the Loan Agreement. prepayment costs. (b) The Guarantor has failed to make payment of principal. (iii) in consequence of any guarantee or other financial obligation of any kind extended by the Bank to any third party with the agreement of the Borrower.INTERNATIONAL FINANCING ON POWER PROJECTS shall take effect 60 days from the date of receipt by the Bank of the Borrower‘s cancellation notice. Performance Failure (c) The Borrower has failed to perform any other obligation under the Loan Agreement or any Hedging Agreement. by notice to the Borrower. prepayment costs. the Bank may. (iii) in consequence of any guarantee or other financial obligation of any kind extended by the Bank to any third party with the agreement of the Guarantor. 56 . or (iv) under any agreement between the Borrower and the Fund or between the Borrower and any Bank Managed Fund. (ii) under any other agreement between the Guarantor and the Bank. interest.02 Suspensions by the Bank 1) If any of the following events has occurred and is continuing. (ii) under any other agreement between the Bank and the Borrower. Cross-suspension (d) The Bank has suspended in whole or in part the right of the Borrower to request or receive disbursements under any agreement with the Bank.

cancellation. termination or pre-maturing was not caused by the failure of the recipient of the Co-financing to perform any of its obligations under the relevant agreement. however. that the provisions of this sub-paragraph shall not apply if the Borrower establish to the satisfaction of the Bank that adequate funds for the Project are available from other sources on terms and conditions consistent with the obligations of the Borrower under the Loan Agreement . or (B) the Co-financing has become due and payable prior to its agreed maturity. or such later date as the Bank has established by notice to the Borrower provided. such co-financing agreement has failed to become effective by that date. (iii) Sub-paragraph (ii) of this subsection shall not apply if the Borrower establish to the satisfaction of the Bank that: (A) such suspension. Co-financing (f) Any of the following events occurs with respect to any Co-financing: (i) If the Loan Agreement specifies a date by which the agreement with such financier providing for the Co-financing is to become effective.INTERNATIONAL FINANCING ON POWER PROJECTS Events Prior to Effectiveness (e) After the Date of the Loan Agreement and prior to the Date of Entry into Force. and (B) adequate funds for the Project are available from other sources on terms and conditions consistent with the obligations of the Borrower under the Loan Agreement. (g) Condition of Borrower (i) Any material adverse change in the condition of the Borrower which materially affects the financial ability of the Borrower to repay the Loan has occurred. (ii) Subject to sub-paragraph (iii) of this paragraph: (A) the right to withdraw the proceeds of the Co-financing has been suspended. cancelled or terminated in whole or in part. any event has occurred which would have entitled the Bank to suspend the Borrower's right to request for and receive disbursements from the Loan Account if the Loan Agreement had been effective on the date such event occurred. 57 . pursuant to the terms of the relevant co-financing agreement.

or to achieve the objectives of the Project. SECTION 5. that an amount of the Loan will not be required to finance any Project costs previously allocated to be financed out of the Loan proceeds. (c) Amount not Required: at any time. (iii) Any action has been taken for or suspension of operations of the Borrower.06 (b) with respect to an amount of the Loan. (d) Closing Date: on the day following the Closing Date.INTERNATIONAL FINANCING ON POWER PROJECTS (ii) The Borrower has become unable to pay its debts as they mature or any action has been taken by the Borrower or by others whereby any of the Assets of the Borrower shall or may be distributed among its creditors. ownership or control of the Borrower has changed from that prevailing as of the date of the Loan Agreement so as to materially and adversely affect the ability of the Borrower to perform any of its obligations arising under or entered into pursuant to the Loan Agreement. the legal character. as the case may be. (g) Cancellation of Guarantee: the Bank has received prior notice from the Guarantor pursuant to Section 5.03 Cancellations by the Bank 1) The Bank may. the Bank determines. has been suspended with respect to any amount of the Loan for a continuous period of 30 days. after consultation with the Borrower. an amount of the Loan shall not have been disbursed. (b) Suspension: the right of the Borrower to disbursement of the Loan. 58 . if: (a) Interruption of the Project: Project operations shall be deemed to have ceased if no disbursement has been made for a continuous period of two years. by notice to the Borrower. cancel the whole or part of the Loan. (iv) In the opinion of the Bank. (h) Modification of the Project: the Borrower has modified the nature or the objectives of the Project financed from the resources of the Loan.

02 and 5.04 Amounts Subject to Special Commitment not Affected by Cancellation or Suspension by the Bank. the provisions of the Loan Agreement shall continue in full force and effect. In the absence of an agreement to the contrary within such 60 day period. and such payment has been made by the Guarantor. 5. and by notice to the Bank and the Borrower. Cancellation of Guarantee (a) If the Borrower has failed to make payment of principal or interest or any other payment required under the Loan Agreement.01. and (ii) in the case of paragraph (c) above. a consultation with the Borrower is carried out as indicated in sub-section (2) below. as provided for in Sections 5. provided that : (i) in the case of paragraph (a) above.INTERNATIONAL FINANCING ON POWER PROJECTS Upon the giving of such notice. terminate its obligations under the Guarantee Agreement with respect to any amount of the Loan undisbursed from the Loan Account on the date of receipt of such notice by the Bank and not 59 . the Borrower shall be given not less than three 3 months‘ notice in writing within which it may submit all or any outstanding disbursement requests for settlement by the Bank prior to Loan cancellation. the cancellation will become effective on the date of expiry of the above-mentioned period. No cancellation or suspension by the Bank shall apply to amounts subject to any Special Commitment except as expressly provided in such Special Commitment. 2) Consultation as required in paragraph (c) of sub-section (1) above must be carried out within 60 days after the date the Bank gives notice of its intention to cancel such amount of the Loan not required to finance any Project costs previously allocated to be financed out of the Loan proceeds.05Effectiveness of the Provisions of the Loan Agreement after Suspension or Cancellation Notwithstanding any cancellation or suspension. SECTION5. SECTION 5. such amount of the Loan shall be cancelled on the date decided by the Bank and indicated in the notice.06. SECTION 5.03 above. the Guarantor may after consultation with the Bank.

such principal together with the interest.01 Events of Acceleration If any of the following events occurs and continues for the period specified. the Guarantor‘s obligations in respect of such amount shall terminate. by notice to the Borrower . and subject to paragraph (b) below. declare all or part of the principal of the Loan then outstanding to be due and payable immediately together with the interest.6 ARTICLE VI ACCELERATION TO MATURITY SECTION 6. prepayment costs. (b) A default occurs in the payment by the Borrower of principal or interest or any other amount due to the Bank: (i) under any other loan agreement between the Bank and the Borrower (ii) in consequence of any guarantee or other financial obligation of any kind extended by the Bank to any third party with the agreement of the Borrower (iii) under any loan agreement between the Bank and the Borrower. The Bank and the Guarantor shall have 60 days from the date of receipt of the notice by the Bank to consult each other. and such default shall continue for a period of 30 consecutive days. prepayment costs. Special Commitment Charge.INTERNATIONAL FINANCING ON POWER PROJECTS subject to any Special Commitment. the Bank may. the Guarantor may notify the Bank of the termination of its obligations. (b) For the purposes of paragraph (a) of this Section. as the case may be. at its option. the Guarantor shall give prior notice to the Bank of its intention to terminate its obligations under the Guarantee Agreement. If at the expiry of this notice period there is no agreement between the parties. Commitment Charge and other charges thereon shall become due and payable immediately from the date of such notification: Payment Default (a) A default occurs in the payment of principal or interest or any other payment required under the Loan Agreement and such default shall continue for a period of 30 consecutive days. Commitment Charge and other charges thereon and upon any such notice. Special Commitment Charge. 12.1. Upon receipt of such notice by the Bank. 60 .

any taxes levied in the territory of the country of the Borrower. economic.8 ARTICLE VIII PROJECT IMPLEMENTATION . and (d) In accordance with the provisions of the Loan Agreement.7 ARTICLE VII TAXES SECTION 7.1. technical. and interest. (b) In conformity with all applicable laws and regulations. (b) The Loan Agreement shall be free from any taxes levied in the territory of the country of the Borrower.02Cooperation and Information 61 .01 Taxes (a) The principal of. financial. (c) In conformity with appropriate administrative. Special Commitment charge. SECTION 8. as well as any performance arrangement to be entered into between the Borrower and the Executing Agency.INTERNATIONAL FINANCING ON POWER PROJECTS Performance Default (c) A default occurs in the performance of any other obligation on the part of the Borrower under the Loan Agreement or any Hedging Agreement. and such default shall continue for a period of 60 days after notice thereof has been given by the Bank to the Borrower. 12.01Project Implementation The Borrower shall carry out the Project and/or cause the Executing Agency to carry out the Project: (a) With due diligence and efficiency. 12. the Loan shall be paid without deduction for.NEGATIVE PLEDGE (PARI PASSU) SECTION 8. and free from. environmental and social standard and practices. commitment charge and other charges on.COOPERATION AND INFORMATION-FINANCIAL AND OTHER INFORMATION .1.

provides a Guarantee and/or request that the Borrower provides such other assurances to the effect that the Borrower shall fulfill its obligations to the Bank. buildings. the Borrower shall provide such representatives of the Bank relevant information and facilitate the examination of records. as the case may be. or a public institution of the Regional Member State in whose territory the Borrower is located or incorporated.INTERNATIONAL FINANCING ON POWER PROJECTS (a) The Bank and the Borrower. works. SECTION8. exchange views with regard to the progress of the Project. equipment. shall cooperate fully to ensure that the purposes of the Loan will be accomplished. accounts and other documents or interview relevant persons. at the request of any one of them. In this connection. sites. the Bank. 62 . To that end. installations. Financial and Other Information The Borrower shall provide to the Bank the information that the Bank shall request relating to their respective organizational structure. records and documents relevant to the performance of the obligations of the Borrower under the Loan Agreement. Such securities may be enforced in accordance with their governing law. property. as necessary. the Bank may require that the Regional Member State. financial statements.04. SECTION8. and the performance of their respective obligations under the Loan Agreement and provide to the other party all such information related thereto as it shall reasonably request. operations. financial situation and.03. (b) The Borrower and the Guarantor shall afford all reasonable opportunity for representatives of the Bank to visit any part of the territory of their country for purposes related to the Loan and enable the Bank's representatives to visit any facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Loan and any plants. the Borrower shall: (i) From time to time. (c) The Borrower shall permit staff and other representatives of the Bank including members of the Bank's Compliance Review and Mediation Unit or its Independent Review Mechanism to perform their functions including conducting investigations. the purposes of the Loan. in particular. as determined by the Bank. Negative Pledge (a) In providing a Loan.

Special Commitment Charge. delivery. Insurance The Borrower shall insure or cause to be insured the goods to be financed out of the proceeds of the Loan against hazards incidental to the acquisition. specifications. transportation.07.05. according to indicators acceptable to the Bank). at the time of purchase thereof. in such detail as the Bank shall reasonably request. solely as security for the payment of the purchase of such property (ii) any Lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after the date on which it is originally incurred. works and services financed out of the proceeds of the Loan. except as the Bank shall otherwise agree: (i) if such Borrower shall create any Lien on any of its Assets as security for any debt. and any material modifications thereof or additions thereto. installation and use thereof during the entire period of Project implementation until completion. the Loan and in the creation of any such Lien express provision will be made to that effect. prepayment costs. 63 . SECTION8.06. Records and Audit (a) The Borrower shall cause the Executing Agency to: (i) Maintain records and procedures adequate to record and monitor the progress of the Project (including its costs and the benefits to be derived from it. SECTION8. contract documents. to identify the goods.INTERNATIONAL FINANCING ON POWER PROJECTS (b) The Borrower undertakes that. such Lien will equally secure the payment of the principal of. Accounts. copies of any plans. construction. to the Bank upon their preparation. or cause to be provided. and interest. Any indemnity for such insurance shall be payable in a freely usable Currency to replace or repair such goods. at no cost to the Bank. SECTION8. and procurement schedules for the Project. and to disclose their use in the Project. reports. Commitment Charge and other charges on. (c) The foregoing provisions of paragraph (b) of this Section shall not apply to: (i) any Lien created on property. Plans and Schedules The Borrower shall promptly provide.

(iii) Provide to the Bank at regular intervals all such information and reports as the Bank shall reasonably request concerning the Project. bills. the benefits to be derived from it. works and services financed out of such proceeds.SETTLEMENT OF DISPUTES . not later than 6 months after the end of the relevant financial year.INTERNATIONAL FINANCING ON POWER PROJECTS (ii) Provide to the Bank reports in form and substance satisfactory to the Bank on the execution of the Project. in any event.1. the expenditure of the proceeds of the Loan and the goods.9 ARTICLE IX . the participation of Project beneficiaries in the implementation and supervision of the Project. If no settlement is reached within 90 days from the date notification is given by one party of a request for submission of the dispute to settlement. as provided hereunder. including recommendations to ensure the continued effective and efficient execution of the Project with a view to achieve its objective. where appropriate. by either party. the dispute may be submitted to arbitration. its cost and. orders. receipts and other documents) evidencing expenditures financed with the Loan until the later of: (i) one year after the Bank has received the audited financial statements covering the period during which the last disbursement of the Loan was made (ii) two years after the Closing Date. The Borrower shall enable the Bank‘s representatives to examine such records. 12. (b) The Borrower shall provide the audited financial statements to the Bank as promptly as possible and.01 Settlements of Disputes (a) Except for liens and other securities taken where the Bank can decide to enforce its rights in accordance with the law governing the creation of such securities. any controversy between the parties to the Loan Agreement and any claim by a party against the other party arising under the Loan Agreement will be settled. invoices.APPLICABLE LAW SECTION 9. 64 . keep all records (contracts. (c) The Borrower shall cause the Executing Agency to. at such intervals as provided by the applicable Bank policy and in accordance with the directives which the Bank shall from time to time issue to that end.

SECTION 9. a successor arbitrator shall be appointed in the same manner as herein prescribed for the appointment of the original arbitrator and such successor shall have all the powers and duties of such original arbitrator. the sources of which shall be taken for these purposes to include: (a) Any relevant treaty obligations that are binding reciprocally on the parties to these agreements. If within 30 days from the date of notification of the submission to arbitration. If within 60 days after the notice instituting the arbitration proceeding. the arbitration shall be conducted in accordance with the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules. 65 . (c) International custom.INTERNATIONAL FINANCING ON POWER PROJECTS (b) Except as otherwise specified in this Section. the two arbitrators shall not have agreed upon an Umpire.02 Applicable Law Unless otherwise provided in the Loan Agreement. as appropriate. any party may request the appointing authority to designate the Umpire. either side fails to appoint an arbitrator. such arbitrator shall be appointed by the appointing authority. and the third arbitrator (sometimes called the Umpire) shall be appointed by the two arbitrators first appointed by the parties. dies or becomes unable to act. In case any arbitrator appointed in accordance with this Section resigns. a second arbitrator shall be appointed by the Borrower. the law to be applied to the Loan Agreement shall be public international law. and (d) General principles of law applicable to multilateral economic development activities. as evidence of a practice accepted as law. The parties to such arbitration shall be the Bank on the one side and the Borrower and on the other side. (b) The provisions of any international conventions and treaties generally recognized as having codified into binding rules of customary law applicable to states and to international financial institutions. (c) The arbitral tribunal shall consist of three arbitrators appointed as follows: One arbitrator shall be appointed by the Bank.

400-MWSamalkot expansion. Andhra Pradesh on 25-07-2011. The Madhya Pradesh government has asked RELIANCE POWER to sign the power purchase agreement (PPA) for the 3. The approval should come in 4 to 6 weeks. We have already funded Reliance Power's coal-based power project in Sasan and its mining venture. Power Finance Corp is coordinating the bidding for the build-own-operate project.000 crore in 10 years by registering its 4.000 MW Tilaiya ultra mega power project for carbon credits after it got two of the other mega projects registered with the Clean Development Mechanism Executive Board (CDM-EB) of United Nations Framework Convention on Climate Change (UNFCCC).800 crore) from US Exim Bank to fund its upcoming 2.INTERNATIONAL FINANCING ON POWER PROJECTS 13. RELIANCE POWER & ADANI POWER as well as others domestic & foreign companies have bid for setting up a Rs 1. This loan is to be disbursed because last year Reliance Power placed a $750-million equipment contract with GE for the 2." This loan is a part of the $5-billion deal signed with Reliance Power for the purchase of US manufactured equipment for power projects. Chairman President of US Exim Bank told that ―The US Exim Bank is close to disbursing a loan of $625 million for Reliance Power plant in Samalkot.000 MW on 12-07-2011.960-MW Chitrangi power project by the end of July month. Mr. RELIANCE POWER is likely to get a loan of $625 million (Rs 2.000 crore from carbon credit from the three ultramega power projects of 4. 3. It seeks to earn almost Rs 2. which involves laying two high capacity 250-km transmission lines to connect Nagapattinam with Madhugiri in Karnataka.400-MW gas-based power project in Samalkot. RELIANCE POWER aims to earn Rs 5.WHY NTPC IS SUPERIOR THAN OTHERS? RELIANCE POWER 1. 4. 66 . Fred P Hochberg. 2.025-crore power transmission project connecting Tamil Nadu and Karnataka even as the central government tightened eligibility rules on 26-07-2011.

ADANI POWER 1.000 MW project at Chitrangi in the same state.320 MW coal-based power project at Kawai in Rajasthan". Adani Power posted a total income of Rs 2.75 crore last fiscal. including Rs 2. 2. 3. A bench of Justice admitted the petition of Tata group company Tata Power and posted the matter for hearing in February next year. but the ADAG Company said it is going ahead with implementation of its projects as per schedule. ADANI POWER will merge group firm Grow more Trade and Investment Private Ltd. the company said on 7-7-2011.620 MW coal-based power project at Mundra in Gujarat.106. "The company is in advanced stages of implementing 4. Tata Power has challenged the decision by the Empowered Group of Ministers to allow Reliance Power to use excess coal from the captive mines meant for the Sasan project in Madhya Pradesh for another 4.based power project at Tiroda in Maharashtra and 1. in a stock deal worth 23.000-crore Sasan Power Project for other power projects. which could be used for developing other power projects.INTERNATIONAL FINANCING ON POWER PROJECTS TATA POWER VS. Adani with its subsidiaries having combine capacity 16. RELIANCE POWER ON 14-07-2011 The Supreme Court on Wednesday admitted Tata group's plea against the government's decision to allow RELIANCE POWER to use coal mined from blocks allotted to Sasan Power for other projects. 67 .500 MW in the coming year. Mauritius with itself.43 crore from sale of power.300 MW coal.07 crore. Tata Power has challenged the Centre's decision to allow Reliance Power to use coal minded from blocks allotted to the Rs 20. The entity raked in a profit after tax of Rs 523. Tata Power had refuted these allegations in its rejoinder and submitted that bidding process for Sasan UMPP was never meant or intended to vest the successful bidder to extra coal supply of 9 million ton per annum. However.6 billion rupees ($531 million).125. ADANI POWER may look at bidding for UMPP with capacity 4000 MW on 18-07-2011.

"We would be able to do about 70. 3. The interconnection between India and Bangladesh is being established through a 500-MW HVDC (high voltage direct current) link between India's eastern region and the western grid of Bangladesh. A total of 213.000 MW.000 crore (over USD 2 billion) loan agreement with State Bank of India for financing its projects. NTPC will make a final offer for a stake in Australia's Bandanna Energy Ltd on 13-07-2011. The company.000 MW looks difficult due to coal shortage and environment issues" on 13-07-2011. NTPC has cut its generation capacity target to 70. State-run power major NTPC's trading arm NTPC Vidyut Vypar Nigam Ltd. which requires huge funding for its upcoming and expansion projects. NTPC 1. recently signed a Rs 10. Coal supply shortages and environmental hurdles may force state-run NTPC to scale down its target for ramping up power generation capacity to 75. remaining 5.INTERNATIONAL FINANCING ON POWER PROJECTS The Merger would be at a share swap ratio of 16.000-mw by March 2017 from 75. (NVVN) has been given the mandate to export 250 MW of power from NTPC to Bangladesh on 18-07-2011. NVVN has signed the power purchase agreement with the Bangladesh Power Development Board (BPDB).000-mw earlier.000 ordinary shares of $1 each of Grow more. 68 .000 MW by 2017.2 million shares of Adani will be issued to Grow more as a result of this swap deal. The transmission lines between India and Bangladesh are being set up under a pact signed between Power Grid Corporation of India Ltd and BPDB in July last year.000 MW by 2017 to 70.615 shares of Adani Power of 10 rupees each for every 10. The links are expected to be in place by early 2013 and are being executed at a cost of around USD 190 million. gas supply and land acquisition issues. due to coal. 2.

These bonds have a coupon of 5.000 MW capacity by 2032. 2021. NTPC's upcoming projects include 1. In recent times. NTPC's bond issue elicited response from more than 230 investors. Karnataka. Deutsche Bank and The Royal Bank of Scotland. who made commitments to the tune of USD 2.625 per cent per annum payable semi-annually and are due for maturity on July 14.320 MW Sholapur plant and 4. The bond sale was part of the company's USD 1 billion Medium Term Note (MTN) programme. The latest fund raising from NTPC also indicates revival in overseas bond market and could also encourage more Indian entities to tap the route on 10-07-2011. European debt woes and concerns about health of global economy have cast a shadow on fund raising activities in international markets. The entity plans to add 1.7 billion from foreign investors. Citigroup.7 billion. Book runners for the USD 500 million bond issue were Barclays Capital. State-run NTPC has raised USD 500 million through an international bond issue that attracted commitments worth USD 2.INTERNATIONAL FINANCING ON POWER PROJECTS 4. 69 . 28.000 MW mega thermal power plants in Kudgi.

in any manner.INTERNATIONAL FINANCING ON POWER PROJECTS 14. either wholly. or partly or on the basis of any equity related warrants attached to debt instruments. to be called the Offered Company.1 EXTERNAL COMMERCIAL BORROWINGS (ECB) External Commercial Borrowings availed of by residents are governed by clause (d) of subsection 3 of section 6 of the Foreign Exchange Management Act. floating rate notes and fixed rate bonds. issued by an Issuing Company and subscribed to by a person who is a resident outside India. Indian companies are allowed to access funds from abroad in the following methods: (a) External Commercial Borrowings (ECB) refer to commercial loans in the form of bank loans. ECB can be accessed under two routes:(i) Automatic Route (ii) Approval Route 70 . 2000. buyers‘ credit. optionally convertible or partially convertible preference shares) availed of from non-resident lenders with a minimum average maturity of 3 years. as amended from time to time.g. suppliers‘ credit. the principal and interest in respect of which is payable in foreign currency. 2000. Foreign Exchange Management Regulations. At present. dated May 3. FEMA 3/ 2000-RB. (b) Foreign Currency Convertible Bonds (FCCBs) mean a bond issued by an Indian company expressed in foreign currency.REGULATORY FRAMEWORK FOR INTERNATIONAL FINANCE 14. and the principal and interest in respect of which is payable in foreign currency. (c) Foreign Currency Exchangeable Bond (FCEB) means a bond expressed in foreign currency. 1999 read with Notification No. non-convertible. in foreign currency and exchangeable into equity share of another company. securitized instruments (e.

(v) suppliers of equipment‘s. Trusts and Non-Profit making organizations are not eligible to raise ECB.1. (vi) foreign collaborators and (vii) foreign equity holders (Overseas Corporate Bodies (OCBs)). Individuals. ii) Recognized Lenders Borrowers can raise ECB from internationally recognized sources such as (i) international banks. (iii) multilateral financial institutions (such as IFC. (ii) international capital markets. (b) Units in Special Economic Zones (SEZ) are allowed to raise ECB for their own requirement. financial institutions (FIs).minimum paid-up equity of 25 percent held directly by the lender. etc.1 AUTOMATIC ROUTE The following types of proposals for ECBs are covered under the Automatic Route:- i) Eligible Borrowers (a) Corporates and Infrastructure Finance Companies (IFCs) except financial intermediaries. such as banks. A "foreign equity holder" to be eligible as ―recognized lender‖ under the automatic route would require minimum holding of paid-up equity in the borrower company as set out below: (a) For ECB up to USD 5 million .) / regional financial institutions and Government owned development financial institutions. (b) For ECB more than USD 5 million . Such NGOs should have a satisfactory borrowing relationship for at least 3 years with a scheduled commercial bank authorized to deal in foreign exchange in India. and Non-Banking Financial Companies (NBFCs) are eligible to raise ECB. ADB. (iv) export credit agencies.minimum paid-up equity of 25 percent held directly by the lender and debt-equity ratio not exceeding 4:1.INTERNATIONAL FINANCING ON POWER PROJECTS 14. (c) Non-Government Organizations (NGOs) engaged in micro finance activities are eligible to avail of ECB. 71 .

72 . The following ceilings are valid until reviewed: Average Maturity Period Three years and up to five years More than five years All-in-cost Ceilings over 6 month LIBOR* 300 basis points 500 basis points In the case of fixed rate loans. The payment of withholding tax in Indian Rupees is excluded for calculating the all-in-cost. c) ECB up to USD 20 million or its equivalent in a financial year with minimum average maturity of three years. iv)All-in-cost ceilings All-in-cost includes rate of interest.INTERNATIONAL FINANCING ON POWER PROJECTS iii) Amount and Maturity a) The maximum amount of ECB which can be raised by a corporate is USD 500 million or its equivalent during a financial year. pre-payment fee. The all-in-cost ceilings for ECB are reviewed from time to time. d) ECB above USD 20 million or equivalent and up to USD 500 million or its equivalent with a minimum average maturity of five years. other fees and expenses in foreign currency except commitment fee. b) Corporates are allowed to avail of ECB up to USD 100 million or its equivalent in a financial year for meeting foreign currency and/ or Rupee capital expenditure for permissible end-uses. and fees payable in Indian Rupees. the swap cost plus margin should be the equivalent of the floating rate plus the applicable margin.

vii) Guarantees Issuance of guarantee. Money Market Mutual Funds (MMMFs). vi)End-uses not permitted (a) For on-lending or investment in capital market or acquiring a company in India by a corporate (investment in Special Purpose Vehicles (SPVs). for on-lending to the infrastructure sector as defined under the ECB policy. infrastructure sector in India.e. (b) For real estate sector. 73 . etc. b) Overseas direct investment in Joint Ventures (JV)/ Wholly Owned Subsidiaries (WOS) subject to the existing guidelines on Indian Direct Investment in JV/ WOS abroad.INTERNATIONAL FINANCING ON POWER PROJECTS v) End-use a) ECB can be raised for investment (such as import of capital goods new projects. modernization/expansion of existing production units) in real sector . c) Utilization of ECB proceeds is permitted for first stage acquisition of shares in the disinvestment process and also in the mandatory second stage offer to the public under the Government‘s disinvestment program of PSU shares.industrial sector including small and medium enterprises (SME). general corporate purpose and repayment of existing Rupee loans. up to 50 per cent of their owned funds. d) Infrastructure Finance Companies (IFCs) i. Financial Institutions and Non-Banking Financial Companies (NBFCs) from India relating to ECB is not permitted. are also considered as investment in capital markets). Non-Banking Financial Companies (NBFCs) categorized as IFCs by the Reserve Bank are permitted to avail of ECBs. including the outstanding ECBs. (c) For working capital. standby letter of credit or letter of comfort by banks..

1999 for creation of charge on immovable assets. xi) Refinancing of an existing ECB The existing ECB may be refinanced by raising a fresh ECB subject to the condition that the fresh ECB is raised at a lower all-in-cost and the outstanding maturity of the original ECB is maintained. 2000 and Regulation 3 of Notification No.INTERNATIONAL FINANCING ON POWER PROJECTS viii) Security The choice of security to be provided to the lender/supplier is left to the borrower. 74 . However. as amended from time to time. in favour of the overseas lender is subject to Regulation 8 of Notification No. creation of charge over immoveable assets and financial securities. 2000. pending utilization for permissible end-uses. respectively. to secure the ECB to be raised by the borrower. such as shares. x) Prepayment Prepayment of ECB up to USD 500 million may be allowed by AD banks without prior approval of Reserve Bank subject to compliance with the stipulated minimum average maturity period as applicable to the loan. AD Category .I banks have been delegated powers to convey ‗no objection‘ under the Foreign Exchange Management Act (FEMA). FEMA 21/RB-2000 dated May 3. financial securities and issue of corporate or personal guarantees in favour of overseas lender / security trustee. ix) Parking of ECB proceeds Borrowers are permitted to either keep ECB proceeds abroad or to remit these funds to India. FEMA 20/RB-2000 dated May 3.

1. 14. reputable regional financial institutions. 75 . by the Reserve Bank. interest and other charges in conformity with the ECB guidelines issued by Government / Reserve Bank of India from time to time.INTERNATIONAL FINANCING ON POWER PROJECTS xii) Debt Servicing The designated AD bank has the general permission to make remittances of installments of principal. b) Infrastructure Finance Companies (IFCs) i. categorized as IFCs. The borrower must obtain a Loan Registration Number (LRN) from the Reserve Bank of India before drawing down the ECB. official export credit agencies and international banks to finance import of infrastructure equipment for leasing to infrastructure projects. for on-lending to the infrastructure sector as defined under the ECB policy.e. Non-Banking Financial Companies (NBFCs). including the outstanding ECBs. xiii) Procedure Borrowers may enter into loan agreement complying with the ECB guidelines with recognized lender for raising ECB under Automatic Route without the prior approval of the Reserve Bank.2 APPROVAL ROUTE i) Eligible Borrowers The following types of proposals for ECB are covered under the Approval Route:- a) ECB with minimum average maturity of 5 years by Non-Banking Financial Companies (NBFCs) from multilateral financial institutions. are permitted to avail of ECBs. beyond 50 per cent of their owned funds.

Same as Automatic Route for Infrastructure (Power) projects.Same as Automatic Route for Infrastructure (Power) projects. vi)End-uses not permitted: .Same as Automatic Route for Infrastructure (Power) projects. will be treated as Financial Institutions and ECB by such entities will be considered under the Approval Route. xi) Refinancing of an existing ECB: .INTERNATIONAL FINANCING ON POWER PROJECTS c) Special Purpose Vehicles. set up to finance infrastructure companies / projects exclusively. iv)All-in-cost ceilings: . iii) Amount and Maturity Corporates can avail of ECB of an additional amount of USD 250 million with average maturity of more than 10 years under the approval route.Same as Automatic Route for Infrastructure (Power) projects.Same as Automatic Route for Infrastructure (Power) projects. ix) Parking of ECB proceeds: . ii) Recognized Lenders: . during a financial year. or any other entity notified by the Reserve Bank. viii) Security: . x) Prepayment Pre-payment of ECB for amounts exceeding USD 500 million would be considered by the Reserve Bank under the Approval Route.Same as Automatic Route for Infrastructure (Power) projects. vii) Guarantee: . over and above the existing limit of USD 500 million under the automatic route. 76 .Same as Automatic Route for Infrastructure (Power) projects.Same as Automatic Route for Infrastructure (Power) projects. v) End-use:.

14.INTERNATIONAL FINANCING ON POWER PROJECTS xii) Debt Servicing: . Foreign Exchange Department. along with necessary documents.Same as Automatic Route for Infrastructure (Power) projects. Mumbai – 400 001. take-out financing arrangement through ECB. 77 .3 TAKE-OUT FINANCE Refinancing of domestic Rupee loans with ECB is not permitted. has been permitted for refinancing of Rupee loans availed of from the domestic banks by eligible borrowers in the power sectors for the development of new projects. Reserve Bank of India.1. xiii) Procedure Applicants are required to submit an application in form ECB through designated AD bank to the Chief General Manager-in-Charge. External Commercial Borrowings Division. Accordingly. under the approval route. Central Office.

1 Risk mitigation Risks are perceived as high partly because projects are typically undertaken not by established utility companies with strong balance sheets but by special purpose companies executing individual projects on a build-operate-transfer or build-own-operate basis. The risks associated with the revenue stream are therefore scrutinized. since penalties for non-performance are typically capped at certain levels and the residual risk has to be borne by investors. Equity investors may be willing to accept higher levels of risk in return for higher expected returns on their equity. but lenders typically have a lower tolerance for risk and a greater need for risk mitigation mechanisms. 78 . 15.INTERNATIONAL FINANCING ON POWER PROJECTS 15.2 Construction risk: . While construction risk can be shifted to some extent. High capital intensity and a relatively long construction period make project costs especially vulnerable to delays and cost overruns.Construction risk refers to unexpected developments during the construction period that lead to time and cost overruns or shortfalls in performance parameters of the completed project. and construction (EPC) contractor is an important element in assessing construction risk. lenders would be satisfied with risk sharing that reduces project risk to a level that can be absorbed by equity investors without jeopardizing loan repayments. Operating risks are typically mitigated by entrusting operation to experienced operations and maintenance (O & M) contractors. However.Operating risk is usually low for infrastructure projects and high for telecommunication sector. procurement. it cannot be eliminated entirely. The reputation and experience of the sponsors and the engineering.3 Operating risk: . RISKS FOR THE INVESTORS 15. Different kinds of risk 15. As a result construction risk is generally higher in sectors such as power and lower in sectors such as telecommunications and urban services.

long payback periods mean that financing must be available over a long period. 79 .INTERNATIONAL FINANCING ON POWER PROJECTS One source of operating risk that is very important in the power sector is fuel supply risk. with appropriate penalties payable by the fuel supplier in the event of nonperformance. In certain situations investors expect the monopoly purchaser to guarantee a minimum level of purchase. 15. in arrangements in which the impacts of interest rate variations on unit costs are treated as a passthrough into the tariff. during which interest rates may change.5 Interest rate risk: . Private financing of power projects depends critically on the ability to negotiate satisfactory fuel supply agreements. for example. interest costs are built into the tariff. Investors are expected to undertake market studies and satisfy themselves that market demand projections at feasible levels would yield adequate profitability. Fuel supply problems are being tackled in different ways in different private sector power projects in India. In the cost-based tariff formula used in many power projects in India. as. High capital intensity implies that interest costs represent a large part of total costs. One way of handling interest rate risk is to pass it on to consumers. thus eliminating market risk for the investor.Interest rate risks arise because interest rates can vary during the life of the project. for example.4 Market risk: .Nonfulfillment of demand projections is an obvious example of market risk. 15. They are particularly important in infrastructure projects because of the high capital intensity and long payback periods. This is typically the case when an independent power producer sells power to a monopoly distributor or a water supply project sells water in bulk to a monopoly urban water distributing company.

such as a public sector distributor.6 Foreign exchange risk: . the risk that exchange rate changes lead to large increases in the domestic currency costs of payments denominated in foreign currency. or a water purifying company has to supply water to a municipal distributor. This risk must be borne by the government through suitable convertibility guarantees. 15.INTERNATIONAL FINANCING ON POWER PROJECTS Risk to be borne by the investor.7 Payment risk: . The feasibility of this option depends on the sophistication of the relevant financial markets and the availability of hedging instruments. 15. 15. the assurance that revenues generated in domestic currency can be converted into foreign exchange for making payments abroad. 80 .8 Regulatory risk: .Two types of foreign exchange risk need to be distinguished. Typically. The other type of risk is exchange rate risk. who in turn can hedge the risk through devices such as interest caps and collars. Because the financial condition of public sector utilities in developing countries is often very weak. The long-term solution to this problem is to improve the financial standing and creditworthiness of the utilities or to privatize distribution so that private sector suppliers can deal directly with private distribution companies or undertake distribution themselves. adding to the costs of operation.It becomes very important in situations in which an independent power producer has to supply electric power to a monopoly buyer. One relates to exchange convertibility. it is much easier to hedge interest rate risks in international markets than in domestic markets.Regulatory risk arises because infrastructure projects have to interface with various regulatory authorities throughout the life of the project. making them especially vulnerable to regulatory action. investors are naturally concerned about the risk of nonpayment for power or water delivered to the distributor when the producer has no alternative outlet for the product. Another source of regulatory risk is that environmental concerns and standards can become more stringent during the life of the project.

and risk mitigation structures will vary depending on the specific circumstances of each project. or bilateral investment protection agreements.INTERNATIONAL FINANCING ON POWER PROJECTS Private investors will expect explicit assurances that cost increases imposed because of regulatory action will be reflected in a corresponding adjustment in the tariff to project profitability. Each project has its own risk profile.9 Political risk: . 15.10 Arrangements for risk mitigation Power projects with suitable off take guarantees may have high construction risks. lenders. 15. is another instrument that can play a useful role in this context.These risks can be partially mitigated through political risk insurance offered by multilateral organizations. relatively low operational and market risks. which covers debt service payments in case they are interrupted because of nonperformance of specific government obligations. 81 . including project sponsors. The World Bank's new partial risk guarantee instrument. risk mitigation arrangements are usually complex. Because of the nature of the risks and the involvement of many participants. and high payment risk. government agencies. such as the Multilateral Investment Guarantee Agency (MIGA). and regulatory authorities.

713.000.649.867.000.610.636.87 4.267.368.00 75.649.000.300.749.000.571.389.000.563.741.130.00 854. BANK JBIC-I (IDP-120) JBIC-II (IDP-138) JBIC-III (IDP-140) JBIC-IV (IDP-144) EUROBONDS 2011 KEXIM SWEDISH EUROBONDS 2016 ADB II Tranche A ADB II Tranche B KFW JBIC BARH NIB BTMU 2031000 2040050 2040040 2040040 2040040 2040040 2040020 2040050 2040050 2040020 2040050 2040050 2040050 2040050 2040050 2040050 ERV CODE 2031002 2040052 2040042 2040042 2040042 2040042 2040022 2040052 2040052 2040022 2040052 2040052 2040052 2040052 2040052 2040052 CURRENCY USD JPY JPY JPY JPY JPY USD USD USD USD USD USD USD USD EUR USD FC 91.000.00 68.00 24.894.00 0.000.00 160.000.714.13 300.65 11.00 15.00 268.INTERNATIONAL FINANCING ON POWER PROJECTS 16.958.000.075.631.00 01/04/2011 82 .00 283.00 11.00 300.DATA ANALYSIS OF THE PROJECT Table16.480.000.000.00 85.110.1: Opening Loan balance sheet of all banks ACCOUNTS CLOSING OPENING DATA Loan Balance as on OPENING LOAN BALANCE LOAN CODE IBRD-3632-O ASIAN DEVEL.884.

883 Total Interest Withholding Tax Total WORLD BANK-MAIN USD . CURR.779.579 0.883 Project Vindyachal-II Kayamkulam EAP-Singrauli EAP-Korba EAP-Ramagundam EAP-Farakka EAP-Rihand EAP-Kahalgaon EAP-Unchahar EAP-Vindyachal-I Korba Share 0.719 4060001 5.023 194.109.999 4060001 2.074 0.005472 95.798.002263 39.579 142.2: Loan wise Allocation of Interest (Net Charge) as on 04/07/2011 Cumulative up to 04/07/2011 LOAN NO.243.798.917.267 9.008 0.893 27.682263 11.001668 29.323 83 2.109.273656 4. JAPAN-Simhadri JBIC-III.719 4.367.006517 113.832 95.528 0.917 11.466.779. JAPAN-Simhadri JPY JPY JPY 4060001 4.466.011115 194.008131 142.INTERNATIONAL FINANCING ON POWER PROJECTS Table16.832 ADB-Unchahr-II Total ADB interest for Unchahar JBIC-I.917 0.144 0.135 39. JAPAN-Simhadri JBIC-II.135 0.243.893 0.001875 32.144 4.267 113.001550 27.917.750 0.008 17.367.023 0. Account Code 4060001 17.528 32.074 29.323 5.999 USD 4060002 9.750 95.005490 95.

411 0.563 2.Sipat I Sipat I SWEDISH Credit Sipat II Sipat II 5.685 0.32286 222.970 0.891.563 2.603.387.268 11.660.0517 10.856.272.272.768.0514 10.168 .901.465.619 1.788.127 11.933 10.953 4060004 206.2243 46.039.399.446 0.480 13.0668 13.127 Total JBIC Interest for Simhadri KEXIM .36667 252.677.875 % Euro Bonds 2016 Project Koldam VSTPP III Unchahar III Sipat I Sipat II Barh Kahalgaon II Korba III USD Share 0.INTERNATIONAL FINANCING ON POWER PROJECTS JBIC-IV.103 8.1642 33.720.772.31048 213.446 252.101 2.563 4060002 9.2021 41.131 52.098.911.630 4060002 688.640.454 2.650.619 84 213.526.891.1945 40.738.419 170.466.915 222.615.349 10.145 17.422.622 0.438 10.958 ADB II Tranche A Project Sipat I Sipat II Kahalgaon II USD Share 0.854 0.832 42. JAPAN-Simhadri JPY 4060001 170.584 58.169.939.294 260.453 0.491.661 13.915 ADB II Tranche B USD 4060002 1.370 0.427.323.193 50.039.045 9.992 3.323 53.617 4060002 2.716.168 11.072 12.293.070 934.630 0.992 688.795.

716) 15.934 85 167.460 64.5474 696.076 243.32465 269.962 711.769 0.27278 561.230 .230 0.3393 431.010.705 696.34522 711.063 0.620 431.769 144.895 201.081 69.156 1.307.660 4060002 830.620 KfW Project Tanda Singrauli Anta TTPS Farakka Unchahar Rihand Vindyachal Share 0.060.705 830.010.01815 15.716) NIB Loan Project ANTA Sipat I Dadri.II Share 0.1133 144.081 0.093 (2.660 0.460 0.INTERNATIONAL FINANCING ON POWER PROJECTS Project Sipat I Sipat II Kahalgaon II Share 0.11806 98.685 98.962 0.060.293 561.07712 64.039 22.181 0.474.29332 243.137 Project Rihand-III 0.13697 179.288 269.181 4060002 2.063 15.06676 55.393 JBIC Barh 4060002 (2.393 55.685 0.076 0.01853 15.08341 69.288 0.950 BTMU 1.950 786.38200 786.093 2.

491 539.11118 Mauda 0.203.140 210.527 Project Rihand-III 0.933 607.199 87.740 185.876 12.044 68.964 1.631 55.07475 Mauda 0.394 298.41239 BTMU 1.763 317.25417 Net Charge 262.153 420.730 86 .INTERNATIONAL FINANCING ON POWER PROJECTS Barh-II 0.234 240.114 162.663 33.078 291.912 258.666 208.19789 Simhadri-II 0.182 100.064 23.17780 Simhadri-II 0.175.327 18.974 237.14158 Vindhyachal-IV 0.420 340.584 163.880 29.059 209.338.005 28.779 41.987 51.17939 Barh-II 0.966.979 368.976 145.762.31389 Vindhyachal-IV 0.

0625% 1.000 181.000 1.600 1.922 1.0625% 1.0625% 1.0625% 1.163.0625% 1.0625% 1.900 3.000 1.0625% 1.527 1.0625% 1.000 2.0625% 1.0625% 1.000 TOTAL 87 .0625% 1.170 1.D III KFW .0625% 1.600 1.336.023 916.000.000 1.0625% 1.0625% 1.272 1.200.0625% 1.418 861.091 3.0625% 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 167 KFW .D V KFW .0625% 1.497 2.0625% 1.225.0625% 1.514 957.989 2.175.0625% 1.387.0625% 1.298 682.D IV KFW .0625% 1.000 7.000 960.603 273.218.INTERNATIONAL FINANCING ON POWER PROJECTS Table16.712.000 1.190.500.000 1.000 528.0625% 1.0625% 1.D IX 3/22/2010 3/22/2010 3/22/2010 3/22/2010 3/22/2010 3/22/2010 3/22/2010 3/22/2010 5. OF DAYS KFW .D II KFW .0625% 1.000 88.525.000 ANTA R&M 3.0625% 1.917.0625% 1.0625% 1.948.0625% 1.0625% 1.000 5.000 561.0625% 1.0625% 1.000 600.261 314.300 153.0625% 1.888.0625% 1.3: Weighted average of KFW Bank WEIGHTED AVERAGE .031.687 4.630 1.D I 9/24/2007 9/24/2007 9/24/2007 1/8/2008 1/8/2008 1/8/2008 1/8/2008 1/8/2008 1/8/2008 3/10/2008 3/10/2008 3/10/2008 3/10/2008 3/10/2008 6/2/2008 6/2/2008 6/2/2008 6/2/2008 6/2/2008 6/2/2008 6/2/2008 6/2/2008 9/9/2008 9/9/2008 9/9/2008 9/9/2008 9/9/2008 9/9/2008 9/9/2008 9/9/2008 3/2/2009 3/2/2009 3/2/2009 3/2/2009 3/2/2009 3/2/2009 3/2/2009 8/3/2009 8/3/2009 8/3/2009 8/3/2009 1/27/2010 1/27/2010 1/27/2010 1/27/2010 1/27/2010 1/27/2010 1/27/2010 3.000 TANDA R&M SINGRAULI R&M ANTA R&M TTPS R&M FARAKKA R&M RIHAND R&M TANDA R&M ANTA R&M TTPS R&M UNCHAHAR R&M RIHAND R&M TANDA R&M SINGRAULI R&M ANTA R&M TTPS R&M FARAKKA R&M RIHAND R&M UNCHAHAR R&M VINDHYACHAL R&M TANDA R&M SINGRAULI R&M ANTA R&M TTPS R&M FARAKKA R&M RIHAND R&M UNCHAHAR R&M VINDHYACHAL R&M TANDA R&M SINGRAULI R&M ANTA R&M TTPS R&M RIHAND R&M UNCHAHAR R&M VINDHYACHAL R&M TANDA R&M SINGRAULI R&M ANTA R&M TTPS R&M TANDA R&M SINGRAULI R&M ANTA R&M TTPS R&M FARAKKA R&M RIHAND R&M UNCHAHAR R&M 1.0625% 1.0625% 1.000 1.481.0625% 1.203.0625% 1.216.0625% 1.0625% 1.D IX KFW .966.0625% 1.626.541 2.388 1.0625% 1.0625% 1.0625% 1.000 2.000 SINGRAULI R&M 5.199 2.394.466 2.756.515.500 197.0625% 1.000 670.0625% 1.756.D VII KFW .904.381.226.0625% 1.450.0625% 1.0625% 1.0625% 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 4/1/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 9/14/2010 167 167 167 167 167 167 167 167 100.068.760 1.0625% 1.269 92.507 679.245.D VI KFW .0625% 1.KFW WORKINGS: Ist Interest Period TRANCHE DATE OF DRAWL AM OUNT IN USD PROJECT ROI DATE FROM DATE UPTO NO.0625% 1.0625% 1.0625% 1.000 TANDA R&M 859.568.143.700 TANDA R&M SINGRAULI R&M ANTA R&M TTPS R&M FARAKKA R&M RIHAND R&M UNCHAHAR R&M VINDHYACHAL R&M 1.0625% 1.239.199.112 271.915.500 1.784 1.210 3.321 575.541 1.900 900.

607 183.300 88 .1250% 1.625.117.714 490.031.347.1250% 1.143 1.539.1250% 1.384.502 2.014 1.061.1250% 1.042.255 585.189.1250% 1.1250% 1.150 85.1250% 1.660 234.1250% 1.336.357 520.1250% 1.224 269.1250% 1.1250% 1.214.714 480.571 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 17 1.714 979.257 2.928 1.1250% 1.1250% 1.781 4.1250% 1.651 1.145.357 991.756 2.1250% 4.1250% 1.643 5.071 1.1250% 1.1250% 1.1250% 1.1250% 1.227 534.1250% 1.1250% 1.023 1.726 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 181 181 181 181 181 181 181 181 1.1250% 1.618.080.714.953 232.1250% 1.INTERNATIONAL FINANCING ON POWER PROJECTS IInd Interest Period ROI Outstanding DATE FROM DATE UPTO NO.764 835.132 493.714 2.150.590.1250% 1.1250% 1.468.550 3.1250% 1.1250% 1. OF DAYS ROI IIIrd Interest Period Outstanding DATE FROM DATE UPTO NO.429 452.714.1250% 1.000 891.298 820.1250% 1.499.1250% 1.156.156 3.163 785.271 1.214 797.571 2.993 142.232.221 3.1250% 1.645 1.1250% 2.215 738.1250% 1.044.1250% 1.282.1250% 1.1250% 1.714 169.1250% 1.566.426 1.943 1.431 1.202.983.929 5.1250% 1.629 771.1250% 1.1250% 1.1250% 1.1250% 1.251.397 1.143 622.1250% 1.777 634.1250% 1.1250% 1.486 1.801 1.1250% 1.464 2.1250% 1.1250% 1.907.1250% 1.1250% 1.357 2.857.1250% 1.1250% 1.875 4.1250% 1.1250% 1.695 3.857 3.1250% 1.1250% 1.1250% 1.286 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 9/15/2010 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 3/14/2011 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 181 1.1250% 1.1250% 1.219.146 1.1250% 1.240.1250% 1.526.1250% 4.373 78.275 1.243.131 253.143 81.243 1.014 1.107.648.562 1.143 2.686 131.885.1250% 1.313 2.286 957.753.346.113.706 1.200 3.1250% 1.429 736.948.1250% 1.1250% 1.1250% 1.904 1.1250% 1.1250% 1.067.156.1250% 1.1250% 1.1250% 1.114 630.1250% 1.853.571 883.042.1250% 1.376 1.000 822.1250% 1.143 1.1250% 1.131.479.1250% 1.533 252.361 2.1250% 1.707.1250% 1.1250% 1.286 1.286 574.571 168.028.1250% 1.824 1.1250% 1.714 2.1250% 1.286 75.1250% 1.307.1250% 1.1250% 1.857 1.1250% 1.429 7.105.093 850.1250% 1.1250% 1.714 557.714 915.488.1250% 1.179 1.357 1.062.1250% 1.066.721.1250% 1.129.1250% 1.759 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/15/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 3/31/2011 17 17 17 17 17 17 17 17 92.429 514.180 2.1250% 1.933 1.1250% 1.1250% 1.321 85. OF DAYS 1.288.720 582.416.438.143 155.1250% 1.371 997.749 1.201.817 799.1250% 1.1250% 1.151.1250% 1.1250% 1.737.909.857 6.429 1.020.276 2.183.1250% 1.1250% 1.1250% 1.1250% 1.857 4.857 1.1250% 1.1250% 1.1250% 1.406 888.1250% 1.114.286 5.1250% 1.742 292.962 2.1250% 2.

INTERNATIONAL FINANCING ON POWER PROJECTS Table16.4: Guarantee fee payable on IBRD for the period 01/04/2011 to 04/07/2011 Table16.5: Guarantee fee of World Bank allocated on different projects 89 .

INTERNATIONAL FINANCING ON POWER PROJECTS Table16.6: Foreign Exchange Rate Variation (FERV) of KFW Bank on different projects 90 .

7: Interest allocation of KFW Bank on different projects 91 .INTERNATIONAL FINANCING ON POWER PROJECTS Table16.

INTERNATIONAL FINANCING ON POWER PROJECTS 92 .

INTERNATIONAL FINANCING ON POWER PROJECTS 93 .

INTERNATIONAL FINANCING ON POWER PROJECTS 94 .

8: Differential Interest of all banks 95 .INTERNATIONAL FINANCING ON POWER PROJECTS Table16.

INTERNATIONAL FINANCING ON POWER PROJECTS 96 .

18. Selection of Indian commercial banks on the basis of competitive bidding process. RFP/RFQ letter include all the terms and condition for investment. The company can look at the root cause of this issue and try to reduce their employee turnover. NTPC checks its own balance sheet to know which subsidiary requires financing. NTPC sends request for proposal (RFP) or request for qualification (RFQ) letter to all banks of that panel set. No doubt that retaining the talent is not an easy task for the public sector companies but a little appreciation and remuneration can really boost the morale of the employees.INTERNATIONAL FINANCING ON POWER PROJECTS 17. NTPC sets a competitive bidding panel. The banks read that RFP/RFQ letter then they come to the panel set for competitive bidding. Each multinational development bank has different code for bidding.CONCLUSION International financing takes place on the basis of competitive bidding process. State Bank of Hyderabad etc.). and different account code. In this panel all the multinational development banks comes to the panel set. different loan code. NTPC directly consults to that bank (winner) for investment.RECOMMENDATION & SUGGESTION The Employee turnover is quite high. After the end of bidding process. The loan amount which is in foreign currency is converted in local currency (INR) by Indian commercial banks (State Bank of India. 97 . At last who has lowest bid price wins the bidding process for investment. Many productive man hours are wasted in order to get the new employee get accustomed to the working environment of the organization.

iea.org (16)www.iea.in (15) www.INTERNATIONAL FINANCE (10) Indian power sector news July 2011 (11) ECB GUIDELINES-RBI (12) Financing Private Infrastructure: Lessons from India.in (14) www.moneycontrol.com (18)www.Montek S.com (3) Position paper.powermin.co.power (4) Financial management-I M PANDEY (5) Financial management-M Y KHAN (6) International financial management-V SHARAN (7)World Bank lending instruments (8) General Conditions Applicable to the African Development Bank Loan Agreements and Guarantee Agreements (9) CPA REVIEWS NOTES.gov.ntpc.nic.in (17)www.in (2) Fore closing of coal & international finance-www.cea.crisil.com 98 .nic.BIBILIOGRAPHY (1) www. Ahluwalia (13) www.cercind.INTERNATIONAL FINANCING ON POWER PROJECTS 19.

INTERNATIONAL FINANCING ON POWER PROJECTS 99 .

Sign up to vote on this title
UsefulNot useful