Financing of power projects in India under the PPP model: a comparative analysis with Australia, Korea & UK
Student name: Mr Varun Gupta
Guide: Dr Rajiv Seth
Year of completion: 2011
Host Organisation: India Infrastructure Financing Company Limited (IIFCL)
Supervisor (Host Organisation): Mr Sanjeev Ghai
Abstract:
SUMMARY
Public Private Partnerships (PPP) in India has been there for quite sometime now. Many power sector projects are being funded under this model. Since power sector projects involve long gestation periods, thus considered to be highly risky the government tries to rope in many private participants in the form of investors or stakeholders. This distributes the risk portfolio and tries to make the project bankable.
There could be many sources which could be used for funding these projects under the given PPP framework. Most countries use different guidelines; different bodies governing such activities and numerous innovative ways to fund them. Australia, Korea and the UK are three countries that have diverse experiences in dealing with PPPs. Each has a different policy framework to work with and some call it Private Finance Initiative (PFI) or PPP. The basic heads of funding such projects are using debt and equity in various proportions depending on the requirement. These can be further broken down under various forms like primary capital markets, equity funds, QIPs, ECBs, Multi Lateral Agencies, bonds, insurance companies, etc. Most of these forms are being used in India.
Therefore securitization, bond market development (which is still in the nascent stage) and the use of ECBs are to be made more prominent to have some more diversification within the financing space of long term infrastructure projects.
