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REC tweaks norms to lend to renewable energy projects

According to reports, Rural Electrification Corporation, the government-owned power sector financier, has just tweaked its lending norms to suit wind and solar projects, the company’s Executive Director, Ashok Awasthi, said today.

“We have significantly changed our guidelines for lending to renewable energy sector,” Awasthi said at a conference on Green Energy here, organised by the Confederation of Indian Industry.

He mentioned four broad changes in REC’s lending norms for renewable energy projects.

First, the moratorium period has been increased from ‘six months from the commercial date of operation’ of the project, to one year from COD. Second, the requirement for collateral security has been removed. Third, the repayment period for the loans can now be up to 15 years. Finally, the debt-equity ratio has been made more liberal—renewable energy projects need only 25 per cent capital to be eligible for REC loans and in certain cases, REC wouldn’t mind a D-E mix of 80:20, Awasthi said.

He said that REC’s tweaking of the lending norms would set a precedent in the industry and other financial institutions would follow suit.

REC, he said, has a line of credit from the German financial institution, KfW, of Euro 100 million, to lend to renewable energy projects in India. He confirmed that the company is also considering a tax-free infrastructure bond issue in India.

REC is particularly keen on renewable energy projects because, at present, there are not many other lending opportunities. There are not many conventional power projects. Funding for rural transmission infrastructure would be predominantly from the government’s Deen Dayal Upadhyaya Gram Jyoti Yojana.

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