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Local Currency Loan for First Public-Private Partnership in India's Power Transmission Sector

MANILA, PHILIPPINES (16 January 2003) - The Asian Development Bank (ADB) approved today a rupee denominated loan equivalent to US$62 million for India's first public-private partnership in the power transmission sector.

A joint venture (JV) company will, on a build-own-operate-transfer (BOOT) basis, construct power transmission lines from Siliguri in West Bengal to Mandaula near the capital, Delhi. These comprise 1,133 km of 400 kilovolts (kV) lines and 20 km of 220 kV lines.

The JV company, Tala-Delhi Transmission Limited, will handle the operation for 30 years before turning it over to Power Grid Corporation of India Limited, a national transmission utility company owned by the Government of India. The project is due to be operational in 2006.

The transmission lines will convey power from the Tala Hydro Electric Power Project in neighboring Bhutan as well as surplus power from India's eastern to northern region, where industries and households suffer from chronic power shortages.

"Besides providing a more reliable power supply to the north of India, the project will promote subregional cooperation through energy trade and help reduce regional gaps between supply and demand in India's power sector," says ADB investment officer Ajay Sagar.

Since the loan is in rupees, ADB will also help develop the Indian local capital market through the issuance of bonds for funding the loan. The Government of India has recently allowed ADB to issue rupee denominated bonds in domestic capital markets.

The total cost of the project is US$249 million equivalent. Debt will make up 70% of the financing, with 25% from ADB and 45% from commercial lenders. ADB's funding is a long-term loan from its ordinary capital resources. The long-term local currency debt financing solution offered by ADB will enhance sustainability and affordability of the project, and help avoid mismatch between the currency of borrowing and the currency of revenue.

The equity financing, covering the other 30% of the cost, is divided between Tata Power Company Limited, India's largest private power utility company (49%); Tata Sons Limited, the principal investment holding company of the Tata Group (2%); and Power Grid Corporation of India Limited (49%).

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