India stepped into the market for green bonds in the year 2015 with YES Bank issuing the first green bond for financing the renewable and clean energy projects. Over the years, this market has expanded to several state-owned commercial banks, public sector undertakings, state-owned financial institutions, corporates, and the banking sector.
What are green bonds?
A green bond is a fixed-income instrument designed specifically to support specific climate-related or environmental projects.
Increasing popularity
Things started moving faster when in 2017, the Securities and Exchange Board of India (SEBI) acknowledged the need for green bonds and issued a circular prescribing disclosure requirement for issuance and listing of ‘green debt securities.’ The importance and popularity of Indian green bonds is likely to increase: they offer an opportunity for clean energy companies to leverage global finance for projects that will help India to meet its renewable energy targets and relatively higher and less volatile yields for global investors.
Record investments in 2021
2021 has seen new records set both in terms of the amount of capital mobilised through green bonds and the low interest rate paid by bond issuers. Indian renewable energy (RE) developers have issued green bonds worth $3.6 billion in the first half of 2021 alone, beating even previous one-year records, according to a study released last week by the CEEW Centre for Energy Finance (CEEW-CEF). The study also found that Indian developers have raised more than $11 billion since 2014 through green bonds issued in international markets. A total of eight developers have raised green bonds in international markets, with Greenko and ReNew Power accounting for nearly 70% of all issuances by value.
In April 2021, ReNew Power raised money from green bonds with a tenor of 7.25 years at a fixed interest rate of 4.5% per annum, and this was soon trumped in August 2021 by the $414 million 2026 green bond issue by Azure Power Global at a record low 3.575% per year.
Azure Power Global Limited (Azure) recently raised $414m via a green bond issued through Azure Power Solar Energy Private Limited, a wholly owned subsidiary of Azure. The bond has been issued at a coupon rate of 3.575% which is the lowest ever coupon for any borrower out of India in the high-yield bond category. Azure’s green bond broke the record set by Greenko’s green bond for the lowest coupon of 3.85% p.a. issued in March for US$940m.
The largest of around 30 deals during the 2020-21 fiscal and in April to July period in 2021-22 financial year was SoftBank’s exit from the Indian renewable energy sector in May 2021 with a US$3.5 billion sale of assets to Adani Green Energy Limited (AGEL). With this acquisition, AGEL became a major investor as well as the world’s largest solar developer. Other major deals included Engie’s acquisition by Edelweiss Infrastructure Yield Plus for $550 million, Acme’s acquisition by Scatec Solar for $400 million, and Fortum’s acquisition by Actis for $333 million.
Source: thecsrjournal.in
