Emerging markets specialist Actis and US private equity firm Cornell Capital are reportedly looking to form an equity consortium with Power Finance Corporation (PFC), a state-owned power sector financing company, to fund power projects in India.
Power Equity Capital Advisors, a newly-established arm of PFC, will run the initiative, the Economic Times reported. PFC will source for projects that require capital and provide opportunities to other consortium members to invest in them, the report said.
“This equity consortium will have both international and domestic financial institutions. While PFC will develop the standard appraisal criteria, the other members will infuse capital in the domestic power projects,” an unnamed PFC official told the Economic Times. “This is a major step towards securing a safe and permanent line of equity for the fund-starved power projects in the country,” the official added.
Hedge funds Highfield Capital Management, Sansar Capital and Capital Management Advisors, as well as private equity firm Nexent Ventures may join the consortium as well, the paper reported.
India requires an estimated investment of about 10500 billion rupees ($232 billion; €159 billion) in its 11th five-year plan to meet its power needs, the Economic Times said. It added that after taking into consideration all existing means of funding, a gap of 4000 billion rupees still exists. While PFC will provide the debt component, the new initiative will seek to accumulate the requisite equity amount.
The shortfall in capital required for power generation and distribution in particular, and for improvement in infrastructure at large is something the Indian government is keen to address, and it is taking measures to fill this financing gap through the initiation of public-private partnerships that often involve private equity funds.