New Delhi: State-run REC Ltd. has raised $650 million by issuing bonds in the international market, the company said in a statement on Friday.
“REC Limited has successfully raised $650 million ( ₹4,450 crore), 5-year bond from REG S Bonds under the established Global Medium Term Programme of $5 billion. Proceeds of the bond will be used to finance power projects in accordance with the approvals granted by the RBI from time to time and in accordance with the ECB Guidelines," said the statement from one of the largest financier for the domestic power sector in India.
The bond issuance by REC followed the $1 billion bond issued by state run Power Finance Corp. Ltd (PFC) in the international market last month. PFC recently completed purchase of a controlling stake in state-run peer REC Ltd that will create an $80 billion lending giant by assets. PFC paid Rs14,500 crore to the Union government to buy a 52.63% stake in REC.
“The 5-year REG S Bond has a semi-annual coupon of 3.375% per annum and a maturity date of 25 July 2024. It offers investors a reoffer spread of 167.50 basis points over the 5-year UST. The transaction saw an oversubscription of more than four times with active participation from more than 140 major international investor accounts allowing it to price inside its current market levels with the tightest coupon ever on its five-year dollar bond," the REC statement added.
The bond issue comes at a time when power sector lenders are recalibrating their loan portfolio in the backdrop of India’s changing energy mix. Investments in the country’s renewable energy sector have doubled over the last five years to around $20 billion in 2018, surpassing the capital expenditure in the thermal power sector, according to a joint study by Paris-based International Energy Agency (IEA) and Council on Energy, Environment and Water (CEEW).
India’s additional clean energy investment requirement is of around $80 billion till 2022, growing more than three-fold to $250 billion during 2023-30.
The country’s power sector is also one of the most highly stressed sectors, with close to Rs1 trillion of loans having turned bad or been recast. Around 66 gigawatts (GW) of capacity is facing various degrees of financial stress, including 54.8 GW of coal-based power (44 assets), 6.83 GW of gas-based power (nine assets) and 4.57 GW of hydropower (13 assets).