International Finance Corporation plans to provide debt financing of up to $43.3 million (Rs 300 crore) to Hero Future Energies Global Ltd for the construction of a solar power plant.
The money will be used to build a 250-megawatt project at Bhadla in Rajasthan, the World Bank's private-sector investment said in a disclosure. The total project cost is $200 million.
The project is being developed by Clean Solar Power (Jodhpur) Pvt. Ltd, a step-down subsidiary of Hero Future Energies. The solar farm will sell power to state-run Solar Energy Corporation of India Ltd as per a 25-year power purchase agreement.
IFC said the financing will involve a local currency loan at a fixed interest rate for up to 20 years. This will improve project viability against any adverse interest rate fluctuations. The long tenor can help increase the overall competitiveness of the project, IFC said.
IFC will also help Hero Future mobilise senior loans. It didn't specify the amount.
This is the second time IFC is backing Hero Future Energies. In 2016, IFC and its Global Infrastructure Fund had each invested $62.5 million in the renewable energy company.
Hero Future Energies is backed by Hero Group, a diversified conglomerate run by the Munjal family. The group’s flagship is Hero MotoCorp Ltd, India's largest two-wheeler maker.
The family owns a majority stake in the company through its investment vehicles, while IFC and its infrastructure fund are also significant shareholders.
Hero Future’s chairman and managing director is Rahul Munjal, the eldest nephew of the Hero group chairman Pawan Munjal.
The company develops both solar (grid-connected and rooftop projects) and wind power plants. It has an installed capacity of more than 1.2 gigawatt and is implementing projects with total capacity of another 1 GW.
IFC has backed several other Indian renewable energy companies. In 2016, it offered around $177 million to Ostro Energy Pvt. Ltd, which was backed by emerging markets-focussed private equity firm Actis. The PE firm agreed to sell Ostro to ReNew Power Ltd last year.
The World Bank arm has also made debt or equity investments in companies such as Tata Cleantech Pvt. Ltd, Azure Power Global Ltd, Actis-owned Solenergi Power Pvt. Ltd, Clean Max Enviro Energy Solutions Pvt Ltd and Mahindra Renewables Pvt. Ltd.
Apart from making debt investments, IFC has an active direct private equity-style investment practice in India. It also has an active limited partner, or LP, portfolio in India where it backs private equity and venture capital funds focused on India.