The Indian government’s Cabinet Committee on Economic Affairs (CCEA) has given in-principle approval for the takeover of REC Limited (Formerly, Rural Electrification Corporation of India), a public sector enterprise, by the Power Finance Corporation (PFC), a government-owned financial institution.
A government release stated, “The Cabinet Committee on Economic Affairs, chaired by the Prime Minister Narendra Modi has given its ‘In Principle’ approval for strategic sale of the Government of India’s existing 52.63 percent of total paid up equity shareholding in REC to PFC along with transfer of management control.”
The acquisition intends to achieve integration across the power chain, obtain better synergies, create economies of scale and have enhanced capability to support energy access and energy efficiency by improved capability to finance power sector. The government also hopes this will allow for cheaper fund raising with increase in bargaining power for the combined entity.
This acquisition is likely to help increase easy financing options for renewable energy projects that are developed in India. In December 2017, Mercom had reported that PFC was planning to shift its investments away from conventional energy and towards renewable energy projects, last-mile transmission and distribution projects in addition to making existing thermal units more energy efficient and refinancing of old projects.
Recently, the REC raised $700 million through initial foray of its $5 billion global medium-term-note (GMTN) program into the 144a market (US Securities and Exchange Act 1933). REC had launched its $5 billion GMTN program on the Global Securities Market (GSM) in October 2018.
In June 2018, the REC had plans to increase loan disbursements for the renewable energy sector to 4-5 percent by 2022. In 2017, REC had raised $450 million through the sale of green bonds on the London Stock Exchange to be utilized to develop solar, wind, and biomass projects, as well as sustainable water and waste management projects.