India looks to private equity for power

India’s Power Finance Corp, a non-banking public sector lender, is reportedly turning to private equity to arrest the country’s infamous power shortfalls. Goldman Sachs and The Blackstone Group have been identified as possible partners.

Power Finance Corp of India is reportedly in talks with a number of potential partners including Goldman Sachs and The Blackstone Group to launch a private equity fund which has a target of over $1 billion to arrest the nation’s severe power shortages.

“We are talking to five or six companies. We want to be the major partner. We will hold 25 to 49 percent in the fund,” a senior official told Reuters.

The fund, which could be domiciled in Mauritius, like many India-focused private equity funds, hopes to “support the last-mile equity requirement of power projects,” according to Economic Times of India, a local daily which quoted unnamed sources including one from the power ministry.

According to the report, each investment would restrict the fund’s exposure to a cap of 10 percent of the total project cost.  Sources in the report also said all the approvals from the power and finance ministries have been obtained.

The government of India has set a target to add fresh power generation capacity of 78,500 megawatt during 2007-12, along with necessary transmission and distribution network.

Rural Electrification Corp of India is also looking to raise equity to fill the country’s power supply shortfall. India is also holding separate talks with multilateral agencies such as the World Bank and Asian Development Bank to obtain funding.