AIIB to Provide $100 Million Loan to L&T for Solar and Wind Projects Financing in India
Fund to get financing approval in Q3 2019
The loan proceeds will be used to finance mid and large-scale wind and solar projects throughout India. The loan mobilizes private capital from sponsors, other financiers, and LTIF’s sources.
LTIF, a non-banking financial company classified as an infrastructure finance company by the Reserve Bank of India, is one of the leading arrangers and financiers of renewable energy in India. LTIF is a subsidiary of L&T Financial Holdings, which in turn, is majority-owned by Larsen & Toubro, an engineering and construction company in India.
The $100 million project fund is to be disbursed until September 2020, and the estimated date of financing approval has been mentioned as Q3 2019.
Through this project, the AIIB proposes to combine the strengths of Larsen & Toubro’s engineering experience and LTIF’s underwriting skills with AIIB’s guidance on the environment and social standards. The new entity will promote environmentally, socially, and financially responsible project development.
The proposed financing is aligned with the government’s plan to reduce India’s carbon intensity by 30%-35% of 2005 levels under the Paris Agreement. There is a dearth of financing options for sustainable energy projects in India, and this venture would increase the supply of renewable energy in India through the mobilization of private capital.
AIIB’s Environmental and Social Policy will apply to this lending facility. The project has been placed in Category FI, the financing structure involving the provision of funds through a financial intermediary, and therefore LTIF has been delegated the decision-making on the use of these funds for sub-projects that will be applied through an Environmental and Management System (ESMS).
LTIF has initiated the establishment of an ESMS system that will be expanded to include screening, categorizing, appraisal, contracting, and monitoring of subprojects supported by the AIIB.
Earlier, the Asian Development Bank (ADB) announced increasing its investment in the Indian grid-infrastructure development by agreeing to fund additional power transmission network components with co-financing from the Asian Infrastructure Investment Bank (AIIB).
Last year, Larsen & Toubro (L&T) Construction bagged two grid-connected solar photovoltaic (PV) projects worth ₹5.9 billion (~$92 million) to be developed in the states of Tamil Nadu and Rajasthan, as was reported by Mercom.
Soumik is a staff reporter at Mercom India. Prior to joining Mercom, Soumik was a correspondent for UNI, New Delhi covering the Northeast region for seven years. He has also worked as an Asia Correspondent for Washington DC-based Hundred Reporters. He has contributed as a freelancer to several national and international digital publications with a focus on data-based investigative stories on environmental corruption, hydro power projects, energy transition and the circular economy. Soumik is an Economics graduate from Scottish Church College, Calcutta University.