28 Jun, 2011

Indian Lender Rural Electrification Corporation (REC) is getting into investing directly into the renewable energy space in India. Note REC along with PFC, IDFC is one of the biggest lenders to the Indian power sector which is expected to treble in capacity over the next decade. These government institutions are instrumental in lending to the capital starved power sector. Both of these companies PFC and REC had come up with follow on offerings (FPOs) to augment their capital base. Now REC is deciding to diversify from its power lending to directly investing in setting up hydro and biomass power plants in the country. A subsidiary REC Power Distribution Company Ltd. will be used to make these green investments.REC is looking to invest more than USD 600 million (INR 26 billion) to set up 300-400 MW capacity in India and is already talking to the Himachal Pradesh government to set up plants there. REC has said that it is looking for power plants with a PLF of more than 50% which automatically rules out wind and solar energy. It’s interesting that REC is concentrating on small hydro and biomass power capacity unlike other PSUs which are mainly concentrating on solar energy. India needs massive amounts of investment in renewable energy in order to meet its 15% Renewable Energy Obligation by 2020 from 5% at present. It’s instrumental for the large government companies to invest heavily into clean sources of energy. Power Finance Corporation Green Energy has been set up by PFC to become one of the biggest lenders in Green Energy and now REC has also decided to directly invest in Green.