IFC provides long-term tenors to match asset life and supports projects in new markets

Shalabh Tandon, Manager, Infrastructure and Natural Resources, IFC South Asia, talks up IFC´s commitment to India and says traditional financing will not be enough to meet the scale of investments needed.

International Finance Corporation (IFC) is refocussing its investment strategy in the power sector. What is the thinking behind your proposed investments in the renewable energy segment?
IFC has been one of the earliest investors in renewable energy in India and leads in promoting the renewable energy generation agenda by investing in private sector developers and helping them leverage opportunities in solar, wind and other forms of renewable energy.

In 2007, IFC made its first investment in a renewable energy project in India. As of FY 15 (ending June, 2015), IFC´s investment in renewable energy (including mobilisation) is over $700 million. IFC also helps mobilise funding from other investors for renewable energy projects. Renewable energy is almost one-fourth of IFC´s infrastructure portfolio in India and it is set to grow in the coming years.

Climate change is a priority for IFC globally. The private sector is a key component in tackling the issue of climate change. The challenge requires both government leadership and large-scale private sector action.

IFC portfolio companies have set up over 2 GW of different forms of renewable power projects in India itself. IFC´s support, provided to developers at a critical stage in their growth trajectory, in turn encourages other financiers to provide support for renewable energy projects. IFC provides long-term tenors to match asset life and supports projects in new markets and with new regulations.

It is encouraging to see the Indian government´s focus and commitment to provide 24X7 electricity to all its citizens over the next five years. The government´s commitment will provide a huge boost to the wind and solar projects as they are easy to implement with short construction period.

Indian banks have been struggling with rise in NPAs and are now shying away from financing infrastructure projects. What has enticed IFC to finance infra projects in the country in such a large scale as you have been doing?
India is central to IFC´s strategy. India is IFC´s top exposure globally and we have a committed portfolio of about $4.7 billion in India. We play an important counter-cyclical role in the country. Large segments of this country´s population continue to struggle to meet the most basic needs of energy, water, sanitation and healthcare. Infrastructure funding helps finance and build much-needed infrastructure so that under-served communities can access basic services in emerging countries. IFC is looking at working with other development banks in addressing huge infrastructure needs that are critical to ending poverty, reducing inequality, and boosting shared prosperity – a mission that drives us.

The Indian Infrastructure segment has been grappling due to non-availability of finance, delays in securing approval for land acquisition and security clearances. In such a situation, what is IFC´s strategy to finance projects?
IFC is a long-term investor in India and we have identified the gap and the acute need in this space. IFC has innovative financing mechanisms. In November 2014, IFC launched the offshore financing programme, Masala Bonds, raising Rs 10 billion ($163 million) to support infrastructure development in the country. IFC had also launched Rs 150 billion ($2.5 billion) onshore rupee financing programme – proceeds from these will be channeled into infrastructure projects in the country. In August this year, IFC issued the first green Masala bond in the offshore rupee markets and raised Rs 3.15 billion ($49.2 million). IFC has invested the proceeds of the bond in a green bond issued by Yes Bank. It, in turn, will invest the proceeds of its bond in renewable energy and energy-efficiency projects.

In addition to investments, we advise client governments on public private partnerships, mostly focussed on infrastructure. Some of our past successful PPP programmes with state governments have focussed on energy-efficient street lighting for safer cities – for instance, in Bhubaneshwar, expanding electricity availability from renewable resources and innovative projects including the solar rooftops project in Gujarat – and helping address food security challenges through world class grain silos facilities like was done in Punjab.

What are the issues you see as bottlenecks for infrastructure growth? What are your expectations from the government to improve the situation of financing projects?
In June 2015, when the World Bank downgraded its outlook for global economic growth for most countries, it upgraded its forecast for India. India is clearly on a growth trajectory.

The government has taken several positive steps to boost the economy and will need to continue the pace of reforms to bridge the infrastructure gap, unlock private investments, and make Indian firms globally competitive.

Arranging financing for large infrastructure projects will be key because traditional financing may not be sufficient to meet the scale of investment needed. Creating the policy frameworks to attract alternate financing mechanisms such as pension funds, insurance companies, attracting overseas investors will help the sector.

IFC is bullish on its investments in India and will continue creating opportunity through the private sector, in close coordination with the government.

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