State-owned Power Finance Corporation may hive off its renewable energy business and consortium lending in early 2010-11 to leverage the current investment boom in green energy projects and diversify its asset base.
PFC provides loan syndication, along with 18 other institutions, mostly banks and Life Insurance Corporation and Hudco, under the Power Lenders' Club.
"The idea is to create a separate wholly-owned subsidiary of PFC to provide consortium lending for large-sized power projects," said PFC sources.
According to a senior PFC official, "There is adequate business in this area. We are lead financiers in 35-40 projects. The subsidiary may be formed in the first quarter. There are separate outfits of similar nature in other financial institutions, too. But independent business is the key."
PFC's initiative to capture a pie of the loan syndication opportunity in power projects comes from the fact that the government, of late, is ramping up private participation in such projects, as a result attracting huge investments from companies.
The contribution of private sector projects in the country's installed power generation capacity is likely to grow from 12 per cent at the end of the Tenth Plan Period (March 2007) to over 16 per cent by March 2012.
"Going forward, syndication is required in projects in the private sector, where we now lend 20-35 per cent of project costs, as against the state sector where we lend up to 80 per cent," the official added.
The other subsidiary will be carved out of PFC's lending business for renewable energy projects. PFC sanctioned loans worth Rs 600 crore for green energy projects till October of 2009-10. Renewable power projects account for over 10 per cent of the country's overall 150,000 Mw of installed capacity.
"One of the ideas behind forming these subsidiaries is to give independence to our executive directors who will become their chief executive officers," the official said.
PFC recorded a 66 per cent jump in net profit for the quarter ended December 2009 at Rs 563.6 crore (Rs 5.63 billion). Its outstanding sanctions at the end of nine months ended December were up 8 per cent at Rs 125,207 crore (Rs 1,252.07 billion).
