Reliance Power secures Chinese funding for major power project
Three Chinese banks have agreed to lend India’s Reliance Power Ltd US$1.1 billion to finance power projects in India.
The loan is the first power loan financed by the Chinese in India. It will be used to refinance part of the US$2.6 billion loan Reliance Power received in financing from banks in India to build a coal-fired power project at Sasan in Madhya Pradesh state.
The plant is to begin producing power in January 2013 and will generate almost 4,000 megawatts of electricity.
The Chinese banks are the Bank of China Ltd., China Development Bank Corporation and Export-Import Bank of China.
The loans are the Reliance Power’s latest deal in China. In October 2010, the company ordered US$10 billion in equipment and services from Shanghai Electric Group Co.
"This is a unique transaction, as we have substituted Indian lenders of the project with Chinese banks to reduce the cost of funding and get better maturities," said Chief Executive Officer Jayarama Prasad Chalasani.
Reliance Power's Chinese financing is much cheaper than that of Indian banks. The annual interest rate on the US$1.1 billion is less than 5%, or about four percentage points above the London interbank offered rate, while the Indian banks charged 13.5%, according to industry sources.
Reliance Power was established to develop, construct and operate power projects in the domestic and international markets. It is presently developing 13 medium and large-sized power projects with a combined planned installed capacity of 33GW.