Need to look at new financing instruments for power assets: Hindustan Power Projects' chairman

Hindustan Power Projects Private Limited (HPP) with its plan to add 1320 mw coal-based power in three to four years is not just an outlier in an industry which is only adding green capacity, it has also started looking at several financing options for funding capacity addition. It includes an initial public offer, tapping of global wealth funds and infrastructure bonds for its upcoming project pipeline.

HPP is in the process to file IPO but the timing would depend on the market conditions. At the same time, it is actively considering raising funds through Infrastructure Investment Trusts (InvITs), said Ratul Puri, chairman, HPP. The company needs close to Rs 15,000 crore in several phases over the next three to four years.

Besides coal, it is looking at 1000 mw of solar capacity over the next two years. The company has already sold solar projects to global insurance funds and would continue on that model.

In an interaction with Business Standard, Puri said both conventional and renewable should now look at new streams of finance. He added that interest rates need to fall further for cost of solar to stabilise.

“Banks don’t have further room to lend to the sector. Bond market in India has got to develop as the infrastructure sector in India cannot expect to finance the conventional way from public sector banks,” said Puri.

He said power sector alone would need Rs 35 lakh crore in coming five years while the exposure of banks is close to Rs 11 lakh crore to infrastructure sector as of now.

“Eventually companies would have to directly access public savings and we need to develop an overseas bond market. We looked at various mechanism and InvITs is extremely good tool to put a mature asset in the hands of consumers,” said Puri.

HPP has sold close to 400 MW of solar assets to global retail funds such as insurance companies and pension funds outside India. “The model is simple. We develop an asset, finance it through the banks and sell it to global agencies post construction,” said Puri. He did not disclose the names.

HPP has completed first phase (1200 MW) of Annupur coal based projects in MP and would now take up second phase (1320 MW). Puri said, after that the company is hoping to start Chhattisgarh coal power plant of 1320 MW.

“We are waiting for the government to either award incremental linkage or coalmine for this project and we would bid accordingly,” he said.

The plan, he said is, “to invest close to Rs 10,000 crore in Annupur and apart from that we would look to pump Rs 5000-6000 crore in building 1000 MW of solar in coming 12 to 18 months.”

HPP’s solar projects which are in the pipeline are the ones won at the tariff of Rs 6-7 per unit and the company is watching the tariffs to stabilise before it participates in bidding again.

Solar tariffs have fallen sub Rs 4.5per unit in past year. Puri is of the view that solar tariffs needs to get rationalised sooner or later for better returns to long term players.

“There is no more room for capital cost to come down and tariffs need to go up a bit for participative players to come in. In the next 6-12 months, we would see much more rational and tariff should stabilise near Rs 5-5.5 per unit,” he said.


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