EESL to raise $100 m through issue of green bonds

India’s largest energy saving services company, Energy Efficiency Services Ltd, intends to raise $100 million through a green bonds issue in London, possibly in November.

EESL, owned by four public sector power companies (NTPC, REC, PGCIL and PFC), is in the business of replacing power guzzling equipment with more energy efficient ones. The customer pays EESL out of the savings in his energy bills.

The company is in the process of appointing a rating agency and a ‘certifying agency’ (to establish the green end-use of the funds) Managing Director Saurabh Kumar told BusinessLine .

Green bonds are debt instruments issued with the promise that the funds will be used for environment-friendly purposes, such as renewable energy or energy efficiency enhancing projects. There is a growing investor interest in green projects, which green bonds are out to tap. Many experts believe green bonds are cheaper, though some disagree.

A successful experiment with replacing old incandescent or CLF bulbs with energy-efficient LED bulbs, got EESL sales of ₹700 crore in 2015-16, ten times the previous year. EESL is yet to formally announce results, but Kumar estimates post-tax profit at around ₹35 crore.

In the current year, the company is on to two more products – ceiling fans and agricultural pumps. Its “ambition” is to see at least 40 lakh running ceiling fans and 5 lakh agricultural pumps replaced with 5-star rated, energy efficient ones.

Since the model EESL works under is to supply the equipment first and get paid later, out of the energy savings, the company has needs substantial money to buy the products (through tenders).

The company expects to require ₹4,000 crore in the current year and ₹6,000 crore in the next.

The $100 million green bond issue is essentially for next year’s programmes; the current year’s programmes are already funded by bank loans, Kumar said. EESL has begun the fans programme in Andhra Pradesh and in the last one month, has replaced 45,000 fans at the customers’ end.

The company sells a 5-star fan for around ₹1,150 apiece, which the customer pays in monthly instalments of around ₹60, over roughly two years. EESL has found that the saving in energy bill consequent upon the use of a more efficient fan will be around ₹80.

The pumps programme works differently. The company, after entering into an implementation agreement with the State government, replaces the existing irrigation pumps free.

The 5-star rated pumps result in an immediate saving of 30 per cent in electricity consumption, which implies 30 per cent saving to the government in subsidies.

Still, in order to get the farmer on board, EESL offers five years free maintenance – the farmer benefits from saving in the maintenance expenditure he would incur if he continued to use his present pump.

In addition, EESL’s pumps are remote-operable – the farmer can switch the pump on or off sitting at home. This is a blessing as farmers have to go to the fields to operate the pumps in the middle of the nights, because that is when free electricity is typically supplied to them.

Kumar says EESL’s turnover could treble to ₹2,000 crore in FY 2016-17.

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