International Finance Corporation (IFC), the private sector lending and investment arm of the World Bank, proposes to provide up to $40 million in senior debt to Tata Cleantech Capital Ltd (TCCL), according to a disclosure.
IFC will subscribe to a senior debt instrument, structured as a green bond, to be issued by Tata Cleantech Capital in one or more tranches.
Funds raised through green bonds are used to finance environmentally friendly projects such as renewable energy generation.
Tata Cleantech, a joint venture between Tata Capital Ltd and IFC, will use the proceeds to finance wind, solar and other climate projects that meet the green bond eligibility criteria. Tata Capital owns 80.5% in the Mumbai-based company; IFC holds the remaining 19.5% equity.
“The green bond will be structured to be compliant with Green Bond Principles, 2016, and TCCL is expected to become a signatory to the green bond principles,” IFC said in the disclosure.
The principles are essentially guidelines that govern the process of selling green bonds and the standards of transparency and disclosure that issuers must follow.
Tata Cleantech identifies, evaluates and funds projects in the renewable energy sector including solar, wind, small hydro and biomass, energy efficiency and water treatment segments. It has funded over 80 renewable energy projects with a total capacity of 3,500 MW.
Tata Cleantech funded Mumbai’s largest solar rooftop project, installed at the National Centre for Performing Arts (NCPA) by Avesta Solar Private (ASPL) last month. It disbursed a total of Rs2.36 crore to the project.
IFC has an active direct private equity-style investment practice, apart from lending to firms in India. It also has a limited partner portfolio; it backs PE and venture capital funds focused on India.
India’s renewable energy sector has seen a lot of activity over the past couple of years after the government set up ambitious capacity addition targets of achieving 175 giga-watt (GW) of renewable power generation capacity by 2022, including 100GW of solar and 60GW of wind power capacity. India’s renewable energy capacity is currently around 44GW.
In February this year, IFC proposed to invest up to $15 million (Rs100 crore) in renewable energy service company Clean Max through compulsory convertible debentures.
Last year, IFC decided to facilitate debt funding worth around $177 million for Ostro Energy Pvt. Ltd, a renewable energy platform backed by emerging markets-focused private equity major Actis.