Lanco taking the same route as Reliance

Infrastructure major Lanco Infratech Ltd has done a Reliance Power in securing long-term debt from the Chinese banks and institutions. Lanco has entered into a memorandum of understanding (MoU) with the China Development Bank (CDB), a bank owned by the government of Peoples Republic of China, to arrange $2-billion debt for two power projects — Anpara Phase II and Himawat.

Each of these projects has a capacity to generate 1,320 mw (2X660 mw) with supercritical boiler technology. CDB is the largest Chinese development banking institution and one of the leading international banks with total assets exceeding $1.1 trillion.

It has sanctioned over $7 billion to Indian corporations and has an outstanding amount of over $4.3 billion.

Reliance Power in June this year had tied up with three Chinese banks to raise about $1.1 billion in loans to fund its ultra mega power project at Sasan.

According to Lanco, of the $2 billion required to be raised, $600 million would be contributed by CDB, and the bank would syndicate the balance from other Chinese banks and FIs.

L Madhusudhan Rao, chairman, LITL, said, “The transaction is going to help us improve the economies of the project and completions on time.”

He said for the past couple of quarters, Lanco has been working on strategies to address the liquidity concerns due to delay in receivables from utilities.

“This is an external commercial borrowing and will result in reduced costs. On a 100% hedging basis, this loan should cost us 150-200 basis points less, and lower than Indian bank rates,” said Sharad Jhingan, Lanco’s head of structured finance.

The deal will be subject to approvals in China and the RBI.

“It is too early to fix a rate to the borrowing. It would take about 10 to 12 months to finalise the loan after getting approvals and the drawdown is linked to the development and construction of projects. The repayment schedules would be of about 10-15 years,” he said.

China Development Bank has already sanctioned $200 million buyers’ credit for Lanco’s Amarkantak 3 & 4, Babandh and Vidarbha power projects.