Mumbai: CLP India, one of the largest foreign investors in the Indian power sector, has raised Rs.600 crore for its wind portfolio—CLP Wind Farms—by issuing green bonds.
The issue is the first green bond issued by a company in India, even though some lenders, such as Yes Bank Ltd, have raised funds by issuing green bonds to agencies such as the International Finance Corporation, the private sector lending arm of the World Bank.
Green bonds enable capital-raising for projects with environmental benefits. These could include projects related to renewable energy, energy efficiency, sustainable waste management, sustainable land use, biodiversity conservation, clean transportation, sustainable water management and climate change adaptation, among others. Money raised through such bonds have to be exclusively used for such projects through a separate account earmarked for these investments.
The global green bond market could hit $100 billion this year, Moody’s Investors Service said in a report on 27 May. In 2014, $37 billion was raised via such bonds globally, said the report.
In simple terms, the key benefits of the green bonds include substantial cost savings through lower and fixed interest rates. Such bonds also enable firms to raise longer term financing.
In India, the market is just developing with CLP India being the first corporate issuer to close such a bond issue.
“The proceeds from these bonds will be used for funding the capital expenditure of its projects in the renewable space. This move will help CLP sustain its expansion of the renewable energy portfolio in alignment with the company’s vision to lower carbon emission footprint,” the company said in a statement.
CLP India is the largest wind power developer in the country, with committed wind projects of more than 1,000 megawatts, spread across six states, the company said in its statement.
The bond issue was assigned a rating of AA by India Ratings and Research. Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations and very low credit risk.
The bonds, with a coupon of 9.15% per annum, are being issued in three series of equal amounts maturing in April 2018, 2019 and 2020.
Standard Chartered Bank, IDFC Ltd and The Hongkong and Shanghai Banking Corp. Ltd (HSBC) are the lead arrangers for the bond issuance.
The transaction by CLP India is the first green bond issuance by a corporate out of India, South Asia as well as South East Asia, said Chetan Joshi, head, debt capital markets India, HSBC. “Sustainable finance, including green bonds, is one of the most important and fast-growing segments of the global markets. We expect CLP’s issuance to pave the way for standardization of this new financing instrument in the Indian capital markets,” said Joshi without naming other possible issuers.
Joshi added that the transaction allows CLP India to diversify its financing mix through the bond market via a fixed rate funding instrument.
CLP India is the wholly-owned subsidiary of CLP Holdings Ltd, which is listed on the Hong Stock Exchange and a leading investor-owned power business in Asia. It is also one of the largest foreign investors in the Indian power sector with a total committed investment of over Rs.14,500 crore.
“Through the issuance of these bonds we plan to fund the expenditure of new projects in the renewable energy space and thereby support CLP’s growth plans for India. There is enormous potential in the Indian renewable power market and we see ourselves making a vital contribution towards the government’s objective of increasing capacities in clean energy,” Rajiv Mishra, managing director, CLP India said.
In April, Mint reported that the government had approached at least eight lenders, including Rural Electrification Corp. Ltd (REC), to raise low-cost and long-term funds to help finance India’s plan to quadruple its renewable energy production, while also aiming to make it economically viable for debt-laden distribution firms to buy clean power.
The dollar- or rupee-denominated green bonds may be raised by India Infrastructure Finance Co. Ltd (IIFCL), Power Finance Corp. Ltd (PFC), REC, IDBI Bank Ltd, Indian Renewable Energy Development Agency Ltd (Ireda), ICICI Bank Ltd and Yes Bank, among others, Mint reported.
Apart from lenders raising money for on-lending through such bonds, firms can independently tap the bond markets, too.
India needs as much as $200 billion to meet its target to install 100 gigawatts of solar power and 60,000 megawatts of wind power by 2022.
Obtaining affordable, long-term and adequate funds has been a challenge for developers of clean-energy projects in India, where interest rates are high and banks are often reluctant to lend to renewable energy projects.