MSETCL was formed as a result of unbundling of the former vertically integrated Maharashtra State Electricity Board (MSEB) in 2005 to create three separate companies focusing on transmission, distribution, and generation. MSETCL operates the largest state-level transmission network in India comprising over 36,000 ckt-kms of transmission lines and 500 substations. Its network spans voltage levels from 500 kV to 66 kV. The state’s transmission infrastructure requires substantial capital investments to improve performance while increasing capacity to handle the power expected from new generation projects.

MSETCL plans to invest over $4 billion over the next 5-6 years in its systems to augment its existing deliverable capacity and reduce transmission losses. IFC has been requested to contribute a long term loan of up to $100 million in A/B loan to part finance this expansion. The balance is expected to be financed by Power Finance Corporation, Rural Electrification Corporation and by way of internal accruals.

50.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	50.0
Equity

* These investment figures are indicative

IFC’s investment would be utilized in incurring capital expenditure towards transmission lines in Maharashtra.

IFC’s involvement in the project is expected to have a development impact in terms of: - Reduction of transmission system losses and improving quality of supply; - Enabling investments in new generation essential for continued economic growth and to provide electricity access to those as yet unserved;; - Transition of the company to better corporate governance and management; - Growth and competitiveness impact by improving power supply to industries currently subject to frequent outages and high coping costs of using environmentally unfriendly diesel based generators;

IFC’s investment is expected to lead to the following additional outcomes: - Access to commercial debt - The proposed investments from IFC would help enhance the capacity and commercial orientation of the company. The financial support will allow this well run, commercially oriented transmission company to transition (at least partially) from sovereign guaranteed funding, including IBRD, to commercial funding - thereby introducing it to the discipline of market based financing, including, commercial due diligence, financial covenants and security creation. IFC’s financing will signal to the market that well run energy sector companies can attract commercial financing for long tenors and thereby make the companies more attractive for local funding sources. - Procurement best practices - The Company will benefit from continued World Bank Group support by way of improved procurement practices. Based on support from various technical assistance programs of the World Bank Group - MSETCL is in the process of developing a strategic alliance model to implement a significant proportion of its investment program. - Private Sector Development - Support to MSETCL will be part of a WBG strategy to simultaneously support the Indian power sector at the policy level and at the investment level for both private and public projects and provide comprehensive WBG support at the state level. - Improved Corporate governance – By way of its engagement, IFC intends to benchmark MSETCL to best practices in the areas of corporate governance and sustainability and if useful IFC can provide advisory support in these areas to further improve their practices. In due course, this support and the validation and branding associated with Bank Group support could become strategic inputs if the company moves towards an IPO. The demonstration impact of seeing a few forward-looking State utilities improve their operations and gain access to commercial debt and equity financing would be a powerful motivator for replication in other Indian states.

This is a category B project according to IFC’s Environmental and Social Review Procedure because a limited number of specific social and environmental impacts may result, which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The key social and environmental aspects that are/may be associated with IFC’s proposed investment relate to MSETCL’s environment and social assessment, corporate environmental, social, and health and safety management system and their implementation. In the context of the Project, the key social and environmental issues, which will have to be managed under environment and social management system include: impacts on households due to restrictions/constraints in the proposed ROW, crop damage and loss of trees during construction/maintenance; employee and community health and safety impact during construction and operation; community consultation and engagement; labor working conditions including employee and contract labor health and safety; impacts due to emissions to soil, air and water during construction and operation; and potential impacts on biodiversity and cultural heritage.

A summary discussion on the social and environmental aspects of relevance to the project including the company’s plans to address these impacts has been provided in the Environmental and Social Review Summary (ESRS) prepared by IFC and publicly disclosed at IFC’s website.