In a novel deal, International Finance Corporation (IFC) is helping Japanese Mizuho Corporate Bank finance a power transmission line project that operates transmission links between East and Northeast India and power-deficit North India.
IFC’s long-term maturity currency swap will enable Mizuho Corporate Bank’s participation in the project without any need to fund in local currency.
IFC provided a 15-year loan in 2004 to Powerlinks Transmission Limited, a joint venture between Tata Power Company Ltd and Power Grid Corporation of India, for their project connecting Tala Hydro power project in Bhutan with the grid in India. This was the first public-private partnership transmission line project in South Asia.
The deal addresses one of the issues faced by foreign banks looking to fund infrastructure projects in India, opening new avenues for them. Participation from many more international commercial banks through similar novel financial structuring mechanisms can help meet India’s rising project financing needs to address the country’s tremendous infrastructure gaps, said the private investment arm of the World Bank in a statement.
“IFC’s innovative structure, the first of its kind to be executed globally, allows a bank to invest U.S. dollars to participate in a local currency loan. This will enable Mizuho Corporate Bank to invest in Indian infrastructure projects. We are keen to do more through creative financial structures that address the needs of projects and meet the requirements of international lenders,” said Takeshi Kurita, General Manager, Global Structured Finance Division, Mizuho Corporate Bank.