Green energy producer ReNew Power Ventures Pvt. Ltd plans to raise around $500 million (Rs3,300 crore) through an offshore bond sale and use the proceeds to repay part of its domestic debt, said three people aware of the development. ReNew Power, backed by Goldman Sachs and the Abu Dhabi Investment Authority (ADIA), has hired HSBC Holdings Plc as the lead manager and is in talks with more investment banks, one of the three people said. “They intend to hire around four to five banks for this and it is expected to soon close the hiring for the syndicate,” this person said, requesting anonymity as the talks are private. The funds to be raised through the bond sale will be used mainly to retire existing debt, the second person cited above said, also on condition of anonymity. ReNew Power has the equivalent of nearly $1 billion in debt.
ReNew Power and HSBC India declined to comment on the development. An email sent to Goldman Sachs on Friday went unanswered. The second person cited above said it was an opportune time to raise money through an overseas bonds sale. “The recent bond issuance by Greenko shows that there is strong investor appetite for Indian renewable energy. That is the thought process behind the firm’s plans…to replace higher domestic debt with cheaper debt from abroad,” he said. Hyderabad-based renewable energy company Greenko Group in August raised $500 million by selling green bonds to overseas investors, marking the first high-yield issuance of its kind by an Indian company. The Singapore government’s sovereign wealth fund GIC Pte Ltd holds a majority stake in Greenko.
The bonds were issued at a yield of 4.875% and saw strong response from international investors, receiving demand for 8.4 times the debt on offer. In July 2014, Greenko had raised $550 million through a bond sale. Apart from Greenko, several companies from other sectors, including Axis Bank Ltd and Jubilant Life Sciences Ltd, have raised funds through offshore bond sale in recent months. “For sectors like renewable energy, there is a lot of interest from international investors,” said Harish H.V., partner at Grant Thornton India Llp. “Renewable companies need long-term capital and overseas investors are a good source of this long-term capital, which is difficult to access domestically. Hence, the interest from companies to tap global investors through bonds.” ReNew Power’s planned bond sale precedes a proposed public listing. In May, Mint reported that ReNew Power had invited investment banks to discuss an initial public offering (IPO).
In an interview with Bloomberg in September, Sumant Sinha, chairman of ReNew Power, said the company’s IPO can potentially take place in the next financial year. Sinha said he only wants to begin ReNew Power’s IPO after it has operational assets of 2 gigawatts (GW) and can give investors a clear pathway to 3.5 GW of capacity. “The company has enough existing equity to develop 2.5 GW and generated cash-flow could be used to reach the 3 GW mark,” Sinha had said. Founded in 2011 by Sinha, a former chief operating officer at wind turbine maker Suzlon Energy Ltd, ReNew Power has now more than 1 GW of operational capacity across wind and solar projects. In October 2015, the company raised $265 million in equity capital from sovereign wealth fund ADIA and existing investors Goldman and Global Environment Fund. The round took the company’s total equity fund raising to $655 million. Goldman has invested a total of $370 million in the company.
The Indian renewable energy sector has seen investors write several large cheques in recent months. In August, International Finance Corp. (IFC), the private sector investment arm of the World Bank, said that it will invest $125 million (Rs840 crore) in Hero Future Energies Ltd, the renewable energy arm of the Hero Group. Piramal Enterprises Ltd’s Structured Financing Group is investing around Rs800 crore in renewable energy firms ACME Solar Energy Pvt. Ltd and Mytrah Energy India Pvt. Ltd, Mint reported. In June, GIC and ADIA signed definitive agreements for a primary equity investment of $230 million in Greenko.
The sharp investor interest in India renewable energy sector is being driven by Prime Minister Narendra Modi’s aggressive push for renewable energy to fight climate change. The government has set an ambitious target of increasing India’s clean energy capacity more than five-fold to 175 GW by 2022. Of this, around 100 GW is to come from solar power. In the climate change talks held in Paris in December last year, Modi said that by 2030, 40% of India’s installed power capacity will be based on non-fossil fuel. India was also among the 20 countries that pledged to double clean energy research investment in the next five years.