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Fund Management

Financial Assistance from KfW and Corpus of Fund

OUIDF has availed Financial Assistance from KfW, Development Bank of Germany in 2 phase (1st and 2nd Line of Credit), for the purpose of Developing and Financing Eco-Friendly Infrastructure Projects undertaken by Urban Local Bodies, Statutory Bodies, Public Sector Undertakings of the State and Private Investors and attracts inter alia, investment and professional advice from Institutions for financing Infrastructure Projects.

Government of India channelises the above Funds through GoO to OUIDF to pass 50% of the Fund as Loan Fund and the remaining 50% as Grant Support Fund under 1st Line and 2nd Line of Credit.

  • Currency risk to be borne by the borrower.
  • Maximum 20% of the total assets of the loan fund or Euro 5 million can be invested in one project.
  • Minimum 10% of the Loan Fund shall be invested in sub-projects without capital grant support. These would be commercially sustainable projects including PPP.
At least 60% of the Loan & Grant Fund should be invested in the following sectors:-

OUIDF Corpus - € 120.50 Million comprising

A. KfW 1st Line of Credit:

KfW Loan Fund- € 50.0 Mn
GoO Equity- € 5.0 Mn
TA Grant KfW-  € 2.5 Mn
TA Grant GoO- € 0.5 Mn
Total -             € 58 Mn

B .KfW 2nd Line of Credit

KfW Loan Fund-  € 55.0 Mn
GoO Equity-        € 5.0 Mn
TA Grant KfW-  € 2.0 Mn
TA Grant GoO- € 0.5 Mn
Total -  € 62.5 Mn

OUIDF undertakes Infrastructure Projects usually with – 45% Grant, 45% Loan & 10% Borrower`s contribution.

Loan

Urban Loan Fund

  • To provide concessional loan to the environmental related urban infrastructure sub-projects in a non guarantee mode.
  • Currency risk to be borne by the borrower.
  • Maximum 20% of the total assets of the loan fund or Euro 5 million can be invested in one project.
  • Minimum 10% of the Loan Fund shall be invested in sub-projects without capital grant support. These would be commercially sustainable projects including PPP.

Repayment Period and Rate of Interest

  • The Loan Fund will offer both short, medium, and long term loans. Loan maturities and grace periods will be based on individual project needs. Depending on its ability to access additional long term funds, it should expand its loan product portfolio to long term loans of up to 20 years maturity.
  • Fixed Rate of interestwill be charged by KfW on the Loan at the rate of 1.79 % per annum

Grant
Grant Support Fund

  • To support sub-projects with capital grant as viability gap funding where necessary.
  • Shall only be rendered to projects which are expected to achieve economic viability after three years of grant support.
  • Maximum 50% of the cost of one sub-project may be financed out of the Grant Fund. In exceptional cases this grant may go up to 70% depending on the viability of the project.

Project Development Fund

  • To provide project development support and capacity building to the Urban Local Bodies (ULBs), development authorities, regional improvement trusts, special planning authorities, Odisha State Housing Board, and Statutory Boards in order to enable them to develop well-structured and bankable projects.
  • For Financing pre-feasibility/feasibility reports, DPRs and Transaction advisory services.
  • While the initial focus of PDF is to finance preparation of Detail Project Reports, it would also be used to undertake other project preparation activities (including preparation of City Development Plans, pre-feasibility and feasibility studies.
  • Development of the Environmental, Climate Change, and Social Framework (ECSF) of the OUIDF;
  • Development of lending policies, procedures, processes and operational manuals and other documents necessary for operation of the OUIDF;
  • Development of innovative financial products (pooled financing and capital market mechanisms) and PPP structures;
  • Total available corpus of PDF Euro 2.5 million under 1st Line of Credit and 2 Million under 2nd Line of Credit.

Eligible Sectors under 1st Line and 2nd Line of Credit.

Sector Under 1st Line of Credit:

Sector Under 2nd Line of Credit:

Water Supply and Water Supply Improvement Schemes (WSIS);
Underground Sewerage Schemes (UGSS);
Solid Waste Management (including landfill sites, waste- to-energy, segregation, recycling and reuse, larger compost yards/dump areas);
Climate Adaptation Measures (e.g storm water and flood drains).
Slum development, rehabilitation and provision of basic urban infrastructure and civic amenities to the informal settlements of the urban areas Energy efficient projects
  Renewable Energy Projects
  Reclamation of Water Bodies/ River Front Development
  Complete Streets and Urban Transport
  Sanitation Projects

The eligible Projects, both under 1st and 2nd Line of Credit have to comply with the following guidelines:

  • Projects shall comply with the Environmental, Climate Change, and Social Framework (ECSF) which has to be set up by the Project Executing Agency.
  • The Projects shall be operated in a technically sustainable manner and with the highest quality standards available at reasonable costs.
  • It has to be ensured that sub-projects are integrated in a Master Plan / City Development Plan established for the respective ULB and are compatible with Urban Development Plans and that there are possibilities for future extension/upgrading.
  • WSIS may only be financed out of the Loan and Grant Fund, in places where a Sewerage System has been conceptualized as well.
  • Provision of loans or taking equity position in the Infrastructure Projects sponsored by Private Investors on a commercial basis when the Infrastructure Projects are considered strategically important.
  • Sub-projects shall comply with all National And State Laws And Regulations in respect to environment, climate, as well as social requirements including involuntary resettlement.
  • The tariff structure of the sub-projects (water and sanitation) shall aim at cost recovery by user charges for operation and maintenance ("O&M") and debt service. If this is not feasible, financing of O&M and debt service by subsidies or otherwise has to be ensured. For other sectors, the O&M and debt service has to be ensured as well by some source of funding. The loan agreements with the ULBs or any other entities shall therefore contain covenants with respect to implementation of appropriate user charges (water and sanitation projects).
  • Investment of only Infrastructure Projects that at the time of the investment comply with all relevant KfW, State and Central Government legislation regarding environmental, climate, and social protection.
  • Provision of financial assistance to ULBs, Development Authorities, Regional Improvement Trusts, Special Planning Authorities, Odisha State Housing Board, Statutory Boards, Public Sector Undertakings and Private Investors, for setting up Infrastructure Projects in the State of Odisha having a positive impact on the environment.

Prior Approval of the Project by KfW

  • Prior consent of KfW is essential for first three sub-projects in each sector.
  • Any major change in project design shall require prior consent of KfW stating reasons the plan majors and the consequence of the change (including on total cost).
  • Execution of such measures may commence only on the basis of revised planning and upon KfW's consent.