The financing of the Mundra UMPP in India created a number of precedents. The financing represents the single largest foreign debt and the largest limited recourse financing to date in India; the largest financing ever done for a power plant in India; and the largest ever financing by the IFC. It is also the single largest facility by the Korean Exim Bank and Korea Export Insurance in India, and the first private sector power project in India to be based on energy efficient supercritical technology.

The 4,000MW 'ultra mega' power plant (consisting of five units of 800MW each) is fed by imported coal and is located at the port city of Mundra in the state of Gujarat in India. The project is the first of the four large scale power projects awarded to private bidders by the Government of India under the UMPP program designed to fast track its electrification program.

The $3.2 billion financing, levered 75:25, comprises an offshore facility of $1.727 billion and a rupee loan worth $1.377 billion.

The dollar financing component was split among multilateral institutions: International Finance Corporation, Asian Development Bank and Korean Export Import Bank and Korea Export Insurance Corporation. BNP Paribas was the sole arranger for the ECA facilities.

The identification and mitigation of risks was a complex affair given that Mundra was the first "open bid" power project of its kind - as compared to the traditional "assured return" types - and due to the key infrastructure being provided by third party operators.

This was apart from the sheer size of the otherwise usual construction, fuel procurement and transportation risks. In addition to these risks and country risk, the challenges overcome, such as the pre-negotiated documents and inter-creditor issues, make the Mundra financing not only the benchmark for future UMPP financings in a difficult lending market, but a model for the financing of rapid electrification programs in other emerging markets.

"The sheer diversity of lenders and many unique issues faced for the first time made this deal very complex and challenging," says Ramesh Subramanyam, CFO of the SPV Coastal Gujarat Power. "The amazingly short span of fourteen months from start to end was full of breathtaking (and back breaking) action. This deal also required a very high level of appreciation of the emerging changes in the Indian power sector and a classic project finance approach would have never worked. The credit goes to the lenders for working through those issues. Of course the trust that the Tata name carries was of great help in closing the deal."

Coastal Gujarat Power

Status: Financial close 24 April 2008
Description: $3.2 bilion financing for a 4,000MW imported coal and supercritical technology-based power plant at Mundra in the state of Gujarat in India
Sponsor: Tata Power
Financial adviser: SBI Capital
Mandated lead arrangers: SBI Capital; International Finance Corporation; Asian Development Bank; BNP Paribas
Participants: India Infrastructure Finance Co; Housing and Urban Development Corporation; Oriental Bank of Commerce; Vijaya Bank; State Bank of Bikaner & Jaipur; State Bank of Hyderabad; State Bank of Travancore; State Bank of Indore
ECAs: Export-Import Bank of Korea (Kexim); Korea Export Insurance Corporation (KEIC)
Legal adviser to the sponsor: J. Sagar and Associates
Legal advisers to the lenders:Chadbourne & Parke; Amarchand Mangaldas
Technical adviser: Black & Veatch
Insurance adviser: Marsh India Private