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Indian renewable energy developers have issued green bonds worth ₹26,300 crore in the first half of 2021, beating previous one-year record, according to a study by the CEEW Centre for Energy Finance (CEEW-CEF).
The study, supported by Bloomberg Philanthropies , also found that Indian developers have raised more than ₹78,200 crore ($11 billion) since 2014 through green bonds issued in international markets.
Greenko and ReNew Power, account for nearly 70 per cent of all issuances by value. The findings highlight the potential of green bond markets to support India’s push to achieve energy-independence by 2047, a target recently announced by the Prime Minister.
Proceeds from the ₹78,200 crore of capital raised have directly refinanced debt for over 10 GW worth of Indian RE projects. Wind and solar power account for 42 per cent each of this refinanced portfolio and represent a combined 8.4 GW. Hydropower makes up the balance. This implies that 8.4 per cent of India’s non-hydro RE capacity, totalling 100 GW, has been debt-financed with overseas capital.
Also read: Power Ministry releases draft rules on green energy open access
Gagan Sidhu, Director, CEEW-CEF, and co-author of the study, in a statement said, “India’s non-hydro RE portfolio crossed the 100 GW mark, but we need to ramp up capital mobilisation to get to 450 GW by 2030. Additional routes of capital such as green bonds will be essential for this transition, which requires investments of more than ₹15 lakh crore in power generation capacity alone. For perspective, the outstanding exposure of Indian institutional lenders to the power sector stood approximately at ₹13 lakh crore as of March 2020.”
High market interest
The CEEW-CEF study highlighted that green bonds issued by Indian developers have generated high market interest, with average oversubscription at 360 per cent. Asian investors have shown appetite by picking up nearly 50 per cent of the bonds. However, the market remains nascent. Only eight Indian developers have accessed international bond markets as of June 2021.
Shreyas Garg, Consultant, CEEW-CEF, and lead author of the study, said, “So far, international green bonds have been primarily raised by India’s established utility-scale developers. Going forward, we hope to see more developers leveraging their financial credentials to unlock much-needed capital through this route. Smaller players without gigawatt-scale capacities should also evaluate green bonds.”
“Further, it is interesting to note that projects with State utilities make up over 60 per cent of bond portfolios, with developers mitigating payment delay risks by diversifying their portfolios. Other firms planning bond raises should similarly structure projects into portfolios that can diversify risk and attract investor interest.”
The study “Financing India’s Energy Transition Through International Bond Markets” recommends increased participation by developers of all sizes in international bond markets. Also, industrial units looking to set up RE plants for captive consumption can leverage their credit profiles to obtain favourable pricing. RE manufacturers can also leverage their inherently ‘green’ businesses to raise green bonds and diversify capital.
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