REC, PFC can boost lending for nuclear projects by banks

The government has opened the nuclear sector for private players, but the biggest concern is getting capital to start the project. State-owned non-banking financing companies – PFC and REC – could address this concern by lending for nuclear projects and building confidence for banks and private lenders, say experts.

Alok Kumar, former secretary, Ministry of Power, says nuclear power will come into the domain of the government’s two big power lending companies – Power Finance Corporation (PFC) and REC Ltd.

“So, if REC & PFC come in nuclear sector, it will build confidence for the other lenders in the private sector or banks. I feel that it is a very important thing, like for Ultra Mega Power Projects (UMPP), REC & PFC were part of the whole exercise. We had numerous meetings with the banks and brought them on board because ultimately, lending is critical to this sector,” Kumar, who was power secretary between 2021 and 2023, tells Business Today.

The capital cost of these projects is expected to remain high at over Rs 15 billion per MW, necessitating investments of over Rs 250,00 billion over the next five to seven years.

He further said that while the ministry was drafting the UMPP documents, both the power financing companies were leading the process.

“So that they were aware of the investors’ concerns and were detailing the concerns of investors and lenders. For the initial few projects (nuclear), the government will have to interact with the lenders to take care of their risk perceptions. It's a new act and for the first time private sector is being involved like government did for UMPPs,” he adds.

Kumar says that the cost of capital is high for power projects because of the quality of project management.

“I am very sure that when the private sector comes, they will improve project management, and the IDC will come down as the private sector can take quick decisions. The government will have to ensure that the licensing process is time-bound. I think those are the factors that impact the cost of capital because the completed project cost also includes IDC and interest during construction, and it is very high if your project execution duration goes on and on,” he added.

REC Ltd is already evaluating to enter into the nuclear space in the next two to three years, with plans to lend to the public sector companies coming up with nuclear power projects, the company’s Director (Projects) Vijay Kumar Singh said in a media interaction in June 2025.

“Nuclear is another new opportunity for us to participate. This entails a Rs 10-12 lakh crore opportunity. We would evaluate and in the next 2-3 years, we could see something happening,” he said, adding that the company will focus on small modular reactors (SMRs).