Germany and India Sign a €200 Million Loan Agreement to Fund Renewable Projects

The Rural Electrification Corporation will provide funds to project developers through low-interest loans through this deal


KfW, a leading German financial institution, has signed a €200 million (~$228.15 million) loan agreement with India’s Rural Electrification Corporation Limited (REC), a state-run power sector financer. KfW signed the agreement on behalf of German Federal Ministry for Economic Cooperation and Development (BMZ).

The REC will fund renewable energy project developers in the form of low-interest loans. These loans will be supplemented by counterpart contributions of up to 30 percent from the borrowers as well as contributions from other banks. The funds provided will be leveraged by the private sector.

“KfW’s financing to promote the increased use of renewables will make an important contribution to slowing the rise in greenhouse gas emissions and reducing the deficit in the power supply,” said Joachim Nagel, a member of the KfW group executive board.

The overall investment is expected to be €285 million (~$325.12 million) and will also be a part of the German-Indian solar partnership.

KfW funds will provide a credit line for 200 MW of capacity, saving up to 285,000 tonnes of carbon emissions each year. This new source of capacity will also be able to supply power to around 270,000 homes.

The German bank will also provide a complementary grant of €1 million (~$1.14million) to implement an environmental and social management solution.

Recently, REC announced a $1 million (~₹67 million) contribution to the International Solar Alliance (ISA).

Mercom previously reported that REC plans to increase its loan disbursements to the renewable energy sector to 4-5 percent by 2022. In the last financial year, the renewable energy segment received ₹34.18 billion (~$0.51 billion) from the REC, which is only one percent of the total outstanding loan amount of ₹2,390 billion (~$ 35.41 billion) available to the sector.

In the past year, the REC raised $450 million through the sale of green bonds on the London Stock Exchange. The funds will go toward the development of solar, wind, sustainable water, waste management, and biomass projects.