Nava Bharat: Energy Solutions for India
(8 pages of text)
On June 30, 2009, Nava Bharat Energy India Limited (NBEIL) proposed the setup of two coal-fired power projects: one in Paloncha, Khammam District, and another in Dharmavaram, East Godavari District, Andhra Pradesh. The sites of these projects were located adjacent to the existing power plants of Nava Bharat Ventures Limited, parent company of NBEIL, a renowned industrial group based in South India.
NBEIL approached the president of a bank to arrange a term loan of ₹9.70 billion through project financing under a syndication strategy. The banker would have to evaluate whether project financing would be a suitable lending instrument for these projects, and if so, what would be the potential implications to both the lenders and project owners? Would it be wise to proceed to syndicate the term loan for the coal-fired power plants?
This case is ideal for MBA students who are studying corporate banking, project finance, or advanced corporate finance as part of their curriculum. This comprehensive case can also be used in executive education programs for senior managerial personnel in banks, financial institutions, or other corporate houses. The case is intended to challenge the participants not only with respect to quantitative aspects but also on qualitative parameters.
The objectives of the case are as follows:
- Assess NBEIL’s project-finance proposal with regard to its managerial, technical, market, environmental, and financial appraisal aspects.
- Understand parent company Nava Bharat Ventures Limited’s rationale in creating a special purpose vehicle in the form of NBEIL.
- Explain the cash flow waterfall mechanism of NBEIL’s power project.
India, Large, 2012
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