What role will IFC play by supporting this project? Can Tata Power raise the necessary financing from commercial lenders?
IFC has a strong role to play in helping the company finance this project. India’s power sector has large financing needs. The Mundra project will be the largest power plant ever built in India. Financing on this scale is not easily fulfilled by commercial lenders. The company needs to raise about $3 billion in loans, which local banks would find difficult to provide due to their sectoral and company exposure limits. IFC’s participation can help attract financing from other multilateral agencies, export credit agencies, and foreign and local banks. For its part, IFC is proposing a loan to provide about 11 percent of the $4.2 billion total project costs. IFC’s support will also improve investor confidence and reduce the perceived risk for banks and other financial institutions. The longer tenor of about 20 years and higher average maturity of IFC’s financing will enable the project to be structured in a manner that will reduce the risk profile for other international investors. The Asia
