Two large private renewable energy developers in India are planning to raise US$500 million each through sale of green bonds. The move highlights the tightening flow of funds in the Indian market due to the sustained crisis in the banking sector.
According to media reports, NYSE-listed Azure Power, one of India’s early entrants to the solar power market, has announced plans to raise US$500 million through the sale of green bonds. The company has appointed HSBC, JPMorgan, Credit Suisse, and Barclays to see through the bond sale.
Canadian pension fund CDPQ owns a 40% stake in Azure Power and the latter would count on this international exposure to garner interest from foreign investors willing to invest in Indian companies, and have lower yield expectations compared to Indian investors.
This would be the second green bond issue by Azure Power. The company had raised US$500 million in August 2017 in its inaugural green bond sale. At that time investors were willing to pour in US$1 billion, that is, twice the bond issue size. Azure got a great deal as the bond was priced at a yield of 5.5%, which was 0.5% lower than the benchmark lending rate of the Reserve Bank of India at that time.
Another developer — Hero Future Energies — is also planning to raise US$500 million through green bonds. Hero Future Energies has the International Finance Corporation (IFC) as one of its investors and is reportedly looking to sell more stake to raise equity funding. In February 2016, the company was India’s second renewable energy developer to raise funds through green bonds.
Hero raised around US$44 million by issuing non-convertible debentures to finance the development of wind energy projects in February 2016. The debentures were issued with a certification from the Climate Bonds Initiative.
Other companies like CLP India and ReNew Power, too, have raised funds through green bonds as the competition in India’s wind and solar power markets has increased significantly over the last couple of years. At the same time the financial condition of the overall power sector has worsened tremendously with several private sector power generators unable to service their debt obligations and lenders refusing to issue more debt. These factors, along with the government’s continued push for expansion of renewable energy capacity, has forced the project developers to look for alternative routes to raise funds.