JSW Hydro raises $707 million in first offshore bond issuance

JSW Hydro Energy Ltd, a subsidiary of JSW Energy, on Monday raised $707 million through its first ever offshore bond issuance.

JSW Hydro is the largest private hydropower producer in India and operates two hydropower plants - 300 megawatts (MW) Baspa II and 1,000 MW Karcham Wangtoo, located in Himachal Pradesh.

The proceeds from the bond sale will be used to primarily repay the existing debt of these two operational hydro projects.

Last week, international rating agency Fitch Ratings assigned an expected rating of 'BB+(EXP)' with stable outlook to the 10 year JSW Hydro bonds due 2031.

Deutsche Bank, Standard Chartered Bank, JP Morgan and Barclays advised the company on the fundraise.

The $707 mn issue was oversubscribed times, despite the current environment.

While the initial price guidance was at 4.5%, the deal finally closed at 4.125%.

“The extremely strong response to the issue, especially in the current environment, is testament to the quality of the issuer and the confidence that overseas investors continue to repose in high-quality issuances out of India,” said Amrish Baliga, managing director at Deutsche Bank.

JSW Hydro's regulated business model supports its credit profile, ensuring profitability until projects are available, irrespective of actual off-take, Fitch Ratings said in its credit rating note.

“Each plant's fixed costs are payable by the customer if it achieves regulatory benchmark availability, measured by the plant availability factor, which is set at 90% for the current regulatory period. The contracts also allow for any shortfalls in design energy generation due to non-operational issues to be recovered. Hence, there is no hydrology risk, as any shortfall in energy charges on account of hydrology can be recovered in the following year,” the rating agency said.

“JSW Hydro contracts its saleable capacity, excluding free power of 12%-18%, to the state government. KW has take-or-pay long-term agreements with PTC, India's largest power trader, which is owned by various central-government entities, while B2 is contracted with state-owned HPSEBL (Himachal Pradesh State Electricity Board Ltd). PTC in turn sells the energy to four state-owned distribution companies,” it added.