Bankers have raised concern over the power ministry’s move to amend bidding guidelines for allocation of power projects that would vest ownership of land with bulk electricity buyers (power distribution companies) instead of developer, saying that it would shut the door for non-recourse financing to the sector.
In case of non-recourse financing, lenders are entitled to repayment of loan only from the profits of the project that they are funding. A delegation of nine banks, including SBI, IDBI, PNB, OBC and ICICI, met senior officials of the power ministry on Tuesday to discuss changes proposed by the ministry in standard bidding guidelines, industry sources said.
The ministry has proposed a design-build-operate-transfer model for the implementation of power projects under Case-II bidding ( where key physical inputs like land and fuel supply is tied by the power procurer) during its ongoing review of the guidelines. These norms will also be applicable to ultra mega power projects.
Bankers argued that if the ministry goes ahead with the proposed change in guidelines, developers would not be able to mortgage land to raise non-recourse financing to fund their projects. These norms may be good for roads and ports but are not practicable for the power sector, sources said.
The power ministry has started review of bidding guidelines after it emerged that several power projects based on Indonesian coal supply could default on their power supply commitment following the recent change in mining law of that country which has sent cost economics of these projects go haywire.