Power Finance Corp., India’s largest state-run lender to electricity utilities, plans to more than double lending for renewable energy projects within a year as coal-fired plants become riskier investments.
The company’s approved loans to projects, particularly solar and wind plants, will increase to 15 billion rupees ($305 million), or 4 percent of the total in the next financial year, from 6.75 billion rupees, or just 1.2 percent in the year ending in March, Chairman Satnam Singh said. The company does not plan to increase its total loan outlays of 450 billion rupees in 2013, he said.
“Given that fossil fuel costs have gone up, investments in wind and solar are surging,” Singh said in an interview in New Delhi. “We’re not afraid to go at renewable in a big way where lending happens much faster, within six months.”
Prime Minister Manmohan Singh plans to spend more than $300 billion to expand India’s electricity systems in an attempt to spur 9 percent economic growth by 2017. An increasing share of that may be directed toward clean energy projects as lenders shun new conventional power projects that are facing risks such as rising fuel costs.
Coal imported from Australia and Indonesia climbed about 28 percent in the last two years, according to weekly benchmark prices from McCloskeys on Bloomberg. That eroded profit margins at plants burning the fuel.
Power Finance shares surged 5.2 percent, closing at 196.5 rupees yesterday in Mumbai trading. The company’s stock has gained 42 percent this year, beating India’s benchmark Sensitive Index which has gone up 14.6 percent over the same period.
The company started a subsidiary, Power Finance Green Energy Ltd., in July to broaden its exposure to renewable energy projects. To date, Power Finance has approved almost 30 billion rupees to renewable projects, with 13.4 billion rupees in loans outstanding as of Dec. 30.
‘Clean’ Versus Coal
The balance and all future loans will be managed by the green energy unit in the new financial year, Singh said.
“Purely from an investment perspective, a clean energy project in India is a lot more attractive than a coal-based project, right now” Praveen Kadle, managing director for Tata Capital Ltd. said by phone today in Mumbai. “Solar and wind can’t possibly replace the capacities of conventional projects, but the risk involved in coal certainly has institutions looking for alternatives.
