India Lender Backs Gujarat Fund to Boost Clean Power Developers

(Bloomberg) -- Indian lender REC Ltd. has backed a proposal from the western state of Gujarat for a fund to support clean energy developers looking to build in the region.

The plan by the state-run power producer and distributor Gujarat Urja Vikas Nigam Ltd. seeks to strengthen investor confidence despite India’s financially shaky distribution system.

“Funding is available aplenty around the world, but from the outside, the perception may be that other distributors may not be profitable” said Jai Prakash Shivahare, GUVNL manging director. “We don’t want to be clubbed together with those companies. We want to highlight our strengths.”

While India’s power distribution system suffers from chronic insolvency issues due to delayed payments and electricity being offered for free to farmers, operators in the renewable-rich state are financially stable because “Gujarat doesn’t believe in giving freebies,” he said. If the “government wants to subsidize sectors like agricultural power, it won’t put this burden on the distribution companies.”

REC will provide anchor financing because “Gujarat’s distribution companies have very good credit history,” said Vivek Kumar Dewangan, the managing director of the financial firm, “so when a developer sets up a new project, we take comfort in the fact that the purchasers will be be paying them on time.” 

The state’s total clean energy target is 100 gigawatts by 2030 — a big chunk of India’s 500-gigawatt ambition. GUVNL’s green power capacity will contribute 60 gigawatts to the state’s energy basket, while the remainder will come from other players in the state, Shivahare said.

©2024 Bloomberg L.P.