International Finance Corporation (IFC), part of the World Bank group, plans to invest $75 million (Rs 330 crore) in Infrastructure Development Finance Company Ltd (IDFC). The fund will be used to make investments in renewable energy as well as cleaner production and energy-efficiency projects across the country.
The proposed investment will be part of IFC’s strategy of partnering with financial intermediaries to scale up the impact of climate change projects in India.
This investment will help IDFC scale up capacity to assess renewable energy/energy efficiency projects through sharing of IFC’s experience and knowledge of these sectors worldwide.
“Through the proposed investment, IDFC and IFC will be able to leverage each other’s strengths, IDFC’s client reach in the local market and IFC’s expertise in climate change projects to achieve a wider scale and impact on climate change investments in India,” according to the project description report.
“Expansion into climate change areas by a leading financial intermediary like IDFC is expected to help attract other financial institutions to increase their risk appetite and invest more in these sectors,” the report added.
IFC’s loan, being a long-term one, would help IDFC balance its structural liquidity. The long-term sources of funds are limited in India.
Long-term funding is particularly crucial to help IDFC expand its lending to renewable energy projects, which typically have long repayment periods. IFC has grown its renewable energy investments to over $720 million (Rs 3,168 crore), a significant increase from $65 million (Rs 286 crore) in 2005. Lars Thunell, CEO of IFC, in an interview to a British newspaper said IFC planned to double its investment in this area.
In November 2009, IFC had committed an equity investment in New Delhi-based
Azure Power, marking the corporation’s first direct investment in a grid-connected solar power project developer in India. The project cost is $60 million (Rs 264 crore). IFC will provide a $10 million (Rs 45 crore) quasi-equity investment to help finance the project.
It was followed by another IFC investment commitment of $25 million (Rs 110 crore) in Bhilwara Energy Ltd, which is planning to develop and operate hydro power assets. IFC said it may also consider warrants which entitle additional subscription to Bhilwara’s equity at a later point of time.
In February came another equity investment of up to $10 million (Rs 45 crore) in Auro Mira Energy Company Private Ltd, a renewable energy-focused company.
IFC said AME plans to develop a portfolio of several hydro, biomass and wind power assets. AME plans to raise the funding required through a mix of debt and equity. IFC is considering equity investment in AME.
