$826 million ADB loan to India for power transmission

New Delhi, March 30 (IANS) The Asian Development Bank (ADB) Friday offered $826 million in loans to India for improving the power transmission systems in the country.

The money will be used to build transmission systems that will help transfer electricity from surplus regions to power-deficit regions efficiently.

The ADB and the Indian government signed three agreements to this effect here.

A $500 million sovereign-guaranteed loan and a $250 million non-sovereign corporate loan will be used to establish an over 1,300-km inter-regional transmission link to allow the bulk transfer of electricity from independent power producers in Chhattisgarh to areas of high demand in the north, including the National Capital Territory Region of Delhi.

The third loan of $76 million (sovereign) will connect the western grid region to the union territories of Daman and Diu and Dadra and Nagar Haveli, the finance ministry said in a statement.

The sovereign loans will have a 25-year term, including a five-year grace period with an annual interest rate determined in accordance with ADB's LIBOR-based lending facility, it said.

The loan will significantly strengthen Power Grid Corporation's corporate credit capabilities and access to future foreign commercial borrowings in the international capital market, Venu Rajamony, joint secretary in the finance ministry, said in a statement after signing of the loan agreements.

The first two loans to the central transmission utility, Power Grid are bundled together to help leverage interest from foreign commercial lenders and move the company from sovereign funding to more market-based capital raising.

The non-sovereign loan of up to 15 years will be Power Grid's first large-scale foreign commercial term borrowing without government credit support.

The government-run Power Grid plans to invest about $22 billion to more than double the size of its transmission network by 2017.

In a bid to raise the required money, the company is expanding its funding base from the present sources of domestic bonds and government-guaranteed loans to the new foreign commercial borrowing.