Power companies are looking to source a total of $650 million in loans, which will be used to fund capacity expansion and meet working capital requirements.

The latest to join the list is Power Finance Corporation. It plans to raise $100 million (yen-denominated) through external commercial borrowings and lend it to finance power projects.

The optimism among the power companies follows last year's dry spell when hardly any foreign loans were raised due to the absence of an encouraging investment opportunity.

Also, till the last financial year, funds were raised by power utilities from foreign markets to prepay the high cost loans sourced by them in the mid-nineties.

The proposals that have already been firmed up include the National Hydroelectric Power Corporation's plans to raise $350 million during the current financial year.

The corporation will use $250 million to finance the 350-mega watt Onkareshwar project in Madhya Pradesh.

The Reliance-controlled Bombay Suburban Electric Supply plans to raise funds to improve its distribution infrastructure in Mumbai.

The National Thermal Power Corporation plans to raise loans to partly finance its capital investments (new and ongoing projects) during the current financial year.

The Power Finance Corporation's loan proposal follows a similar loan raised last year.

The fact that the company is raising loans to fund projects in spite of the fact that many power companies are generating their own resources shows that investment opportunities in the sector have increased.

The Power Finance Corporation's board will take a decision on the external commercial borrowings soon.

The rates at which the loans are being sourced are also attractive. BSES is raising $100 million at 110 basis points over the London inter-bank offer rate.

The National Hydroelectric Power Corporation and National Thermal Power Corporation are also expecting attractive rates and have invited offers from foreign banks.

Depending on the response of their respective external commercial borrowings issues, the Power Finance Corporation and National Thermal Power Corporation plan to raise more funds from foreign markets as Libor is quoting at its lowest.

"The Power Finance Corporation has targeted Rs 8,000-9,000 crore (Rs 80-90 billion) in a combination of domestic loans and external commercial borrowings issues this fiscal and more funds can be leveraged from the market depending on the response to the issue," an official said.