ADB Lending $450M for the First Ultra Mega Power Project in India

MANILA, PHILIPPINES - The Asian Development Bank (ADB) executed a loan agreement for a $450 million loan to Coastal Gujarat Power Limited (CGPL), a wholly owned subsidiary of the Tata Power Company Limited which is the largest private power utility in India. CGPL will build, own and operate the 4,000-megawatt Mundra Ultra Mega Power Project in the western state of Gujarat. This is expected to be the first in a series of large energy-efficient power plants to help ease power shortages across the country.

“The project will not only provide a significant volume of additional electricity to address shortages, it will also promote private investment in power and show good practice in building and financing large-scale power projects in India through public-private partnerships,” said Takeo Koike, Investment Specialist of ADB’s Private Sector Operations Department.

Ultra Mega Power Projects (UMPPs) were launched by the Government of India to achieve rapid electricity generation capacity additions and competitive tariffs through economies of scale. The Government undertakes initial development of a project, including identification of sites, obtaining environmental clearances, and allocation of energy sales. The Government transfers the project to the winner of an international competitive bidding process. The Tata Power Company Limited won the bid for the Mundra UMPP.

The Mundra Ultra Mega Power Project includes five 800-MW units using supercritical technology. This technology improves the conversion efficiency (of fuel to electric power) to some 44%, compared with only 34%-36% for conventional coal-fired power plants. This results in annual savings of some 3 million tons of coal, and avoidance of over 28 million tons of carbon dioxide emissions in the first 10 years of operations.

“India will be dependent upon coal as a fuel for a large portion of its power generation for the foreseeable future as it has no other practical alternatives. The issue is thus to ensure cleaner coal technology is deployed to minimize environmental impacts including the emission of greenhouse gases,” Mr. Koike said. “This plant will require less coal to generate the same level of output as a conventional plant. Additionally, it will use imported fuel that has lower sulfur and ash content, ensuring it meets national and international emissions standards.”

The ADB will provide long-term financing of up to 20 years which will translate into a competitive power tariff for the benefit to the economy and ultimately of power consumers. The ADB loan will be provided in two tranches, with the first totaling $250 million and the balance syndicated by ADB to the Export-Import Bank of Korea (KEXIM) through a risk participation agreement.

“ADB’s risk participation arrangement with KEXIM was essential to mobilize a large volume of competitive financing from Korea, and ADB has played a proactive and constructive role in structuring the debt financing and coordinating among the lenders,” said Alok Kanagat, Project Director, CGPL. “We are very pleased with the partnership with ADB, and appreciative of its contribution to achieving the signing today of this important project, and all within the required time.”

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