India has been experiencing an annual economic growth exceeding 8% per annum for the last several years, and the government is working to create an enabling environment for this growth rate to be maintained at this level and accelerated further over the medium term. To expand power supply network is a key infrastructural input to sustain such a growth rate. Power Grid Corporation of India Limited (Powergrid) is the public sector corporation that is responsible for construction, expansion, operations and maintenance of the inter-state and inter-regional power transmission network of India. Over the next 7 years, up to the end of the 12th Plan period, Powergrid proposes to invest about $22 billion to double the size of its network to cater to the demand from additional generation units and strengthen its inter-regional and inter-state transmission capacity.
|Project Name||Innovative Financial Instruments for Power Grid|
|Project Type / Modality of Assistance||Technical Assistance
|Source of Funding / Amount||
|Strategic Agendas||Inclusive economic growth
|Drivers of Change||Governance and capacity development
|Sector / Subsector||
Energy - Electricity transmission and distribution
|Gender Equity and Mainstreaming||No gender elements|
|Description||India has been experiencing an annual economic growth exceeding 8% per annum for the last several years, and the government is working to create an enabling environment for this growth rate to be maintained at this level and accelerated further over the medium term. To expand power supply network is a key infrastructural input to sustain such a growth rate. Power Grid Corporation of India Limited (Powergrid) is the public sector corporation that is responsible for construction, expansion, operations and maintenance of the inter-state and inter-regional power transmission network of India. Over the next 7 years, up to the end of the 12th Plan period, Powergrid proposes to invest about $22 billion to double the size of its network to cater to the demand from additional generation units and strengthen its inter-regional and inter-state transmission capacity.|
|Project Rationale and Linkage to Country/Regional Strategy||
To increase the capital required for the planned network expansion, it will be crucial to diversify its debt financing sources and strengthen its financial leverage effects. Compared to the rather stagnant level of multilateral banks' funding available to India, the Powergrid's investment requirements continue to grow at a rapid pace; therefore the funding quantum gap will continue to widen. To tackle this reality, the Government of India has sought ADB assistance to help the Powergrid leverage its financing capacity through various non-sovereign financial products including loans and credit enhancement.
To finance its substantial investment plans over the next 7 years, Powergrid needs to raise resources of about $22 billion. Assuming a debt component of 65%, this translates to about $14 billion or $2 billion per annum. With the gradual reduction in availability of sovereign-backed funds, Powergrid will be compelled to expand its borrowing from commercial sources. It may no longer be able to rely exclusively on the rupee bond issue route to finance its long-term capital requirements. It needs to urgently diversify its sources of financing to include other options like global bond issues, borrowings in foreign currency from international institutions, and also resort to off-balance sheet financing like project finance, joint ventures, securitized facilities etc.
|Impact||Continued financial ability of Powergrid to provide adequate national power transmission capacity to sustain economic growth.|
|Description of Outcome||Powergrid's financial closures with commercial lenders on nonsovereign basis increased.|
|Progress Toward Outcome||Powergrid's Corporate financing plan and roadmap for nonsovereign operations developed. Powergrid has since concluded another ECA agreement with external commercial lenders.|
|Description of Project Outputs||
1. Powergrid's Institituonal financial risk management system established and recasting of financial statements based on International Financial Reporting Standards (IFRS).
2. Powergrid's Corporate financing plan and roadmap for nonsovereign operations developed.
3. Comprehensive project appraisal system established including legal, financial and safeguard assessments.
|Status of Implementation Progress (Outputs, Activities, and Issues)||
A draft paper has been developed outlining Powergrid's funding strategy.
Powergrid intends to pursue its options to borrow funds from international markets, including obtaining an international credit rating, over the next 2 years.
Powergrid has further strengthened its internal project appraisal systems which are substantially in conformity with ADB's Safeguards Policy Statement, 2009. Rigorous financial assessment of projects is made before taking any investment decisions.
|Summary of Environmental and Social Aspects|
|Stakeholder Communication, Participation, and Consultation|
|During Project Design|
|During Project Implementation|
The SSTA will recruit 2 international consultants including (i) a financial specialist and (ii) a legal specialist. They will be supported by two national consultants in the same fields to carry out detailed data gathering and analysis. In addition, to ensure that safeguards requirements will be incorporated into the design of the demonstration projects selected for financing, the work will be supported by national environment and resettlement specialists. To assess the project's economic aspect, one national economist will be included in the SSTA. These seven consultants will work on an intermittent basis during the TA implementation period from November 2010 to October 2011.
The consultants would be recruited as individual consultants, separately. They will be engaged in accordance with ADB's Guidelines on the Use of Consultants (2010, as amended from time to time). The SSTA is expected to be implemented from November 2010 to October 2011.
|Responsible ADB Officer||Janardanam, Srinivasan|
|Responsible ADB Department||South Asia Department|
|Responsible ADB Division||Energy Division, SARD|
Power Grid Corporation of India Limited
Plot No. 2, Sector - 29
Gurgaon - 122 001 Haryana, India
|Concept Clearance||28 Feb 2010|
|Fact Finding||28 Feb 2010 to 13 Mar 2010|
|Approval||26 Nov 2010|
|Last Review Mission||-|
|Last PDS Update||30 Mar 2012|
|Approval||Signing Date||Effectivity Date||Closing|
|26 Nov 2010||-||26 Nov 2010||31 Oct 2011||-||-|
|Financing Plan/TA Utilization||Cumulative Disbursements|
|225,000.00||0.00||0.00||60,000.00||0.00||0.00||285,000.00||26 Nov 2010||131,126.39|
Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.
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Safeguard Documents See also: Safeguards
Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.
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Evaluation Documents See also: Independent Evaluation
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