REC, PFC approve $1.5bn loan for Adani Power

State-run lender Power Finance Corp Ltd and its unit REC Ltd have approved a Rs102.5bn ($1.5bn) loan for Adani Power Ltd’s coal-fired power project in India’s eastern state of Jharkhand, according to people familiar with the matter.The loan for the 1,600-megawatt project will be divided equally between the two lenders, the people said, asking not to be named as the decision isn’t yet public.Seventy per cent of the project’s cost will be funded through loans and the rest by equity, with REC and Power Finance providing the entire debt, they said. That works out to a total project cost of Rs146.4bn, according to Bloomberg calculations.The project, which is being set up to sell power to Bangladesh, is located in one of India’s biggest coal-producing provinces.The cost includes building a transmission line for the evacuation of power as well as the installation of equipment to keep sulphur-dioxide emissions in check, the people said. Officials at Adani, REC and Power Finance didn’t respond to e-mails seeking comment. Lenders are banking on Adani’s long-term power purchase agreement for the sale of electricity to the Bangladesh Power Development Board, the people said.The project will also get tax breaks since it has been approved by India’s commerce ministry as a special economic zone, or an export-oriented industrial operation, they said.Bangladesh’s electricity generation is dominated by natural gas, which has a 56% share in the fuel mix, according to the Bangladesh Power Development Board’s website.Furnace oil and diesel together account for about a third of the fuel mix.The country plans to replace its liquid fuel-run generation capacity with coal, which fires less than 3% of its generation capacity.The plant will use imported coal and will need as much as 9mn tonnes annually to run at 85% of its capacity, according to an approval document from India’s environment ministry.Adani, which has mines in Indonesia, Australia, may source the coal from those countries or South Africa.