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ECB's back in Indian power
24 February 2011
As domestic banks brush against exposure limits, dollar ECB debt is finally making some headway in the Indian power market. But sponsors are finding a combination of fuel price and interest rate volatility hard to manage. Robin Sayles reports.
While the Indian power sector continues to grow at a pace that many countries can only dream of, some conventional projects are not progressing as quickly as lenders and sponsors would like.
The sheer number of conventional projects being developed in India has put huge pressure on the domestic banking community, which provides almost all of the sector’s non-recourse debt requirements. The lack of any significant migration of deals into the bond market places added weight on banks’ balance sheets.
In this context, the biggest lenders, which are frequently owned or controlled by the state, have hit their exposure limits for power deals. There could be some relief in the new financial year, which starts in April, but deals have been slower to close in recent months, and banks have been more careful with less creditworthy developers.
Projects are either based on regulated tariff terms, in which interest rate movements...
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