India has raised $43 billion in the hidden universe of Green Bonds since 2014: Report – EQ Mag
New Delhi : India has raised $43 billion since 2014 through green bonds which have played a significant role in financing the growth of renewable energy in the country, according to a new report from Blooomberg New Energy Finance (BNEF) .
“Power producers are leading the issuance of these green debt securities and also bringing innovation in their structuring. The emergence of Indian sovereign green bonds has spurred regulatory reforms and catalyzed new debt products. market, which can broaden the investor base and attract even more capital,” the report states.
Capital-intensive clean energy projects with stable, long-term revenues are well suited for bond financing. According to the report, India’s annual green bond issuance – labeled and unlabeled bonds – reached a record high of $9.5 billion in 2021.
Green bond volumes in the electricity sector fell sharply in 2022, both for rupee-denominated and dollar-denominated notes. Tighter monetary policy leading to higher bond yields and the depreciation of the rupee against the dollar caused the decline in 2022.
Domestic power producers account for almost 80% of India’s green bonds from January 2014 to March 2023, with Greenko, ReNew and Continuum being the main issuers. The annual share of the top five issuers continued to decline for the third consecutive year, indicating that more companies are now participating in the green bond market.
In terms of bond structure, medium-maturity bonds (five to 10 years) dominated through 2021, but shorter and longer-maturity bonds gained prominence in 2022. Fixed-maturity bonds are the more common, but several issuers of bonds with call options (those that allow early redemption) were able to take advantage of low borrowing rates in 2021 to refinance their debt.
Additionally, government issuers including IREDA, NHPC and NTPC are more conservative in their green bond structures, with a strong preference for medium maturities, fixed maturities and fixed coupon rates. In contrast, private companies issued zero-coupon bonds, sold call options, and tied coupon rates to lending rates or other external benchmarks.
The report found that refinancing was the most common use of the product in 2022 and its popularity has been increasing since 2019. Corporate general purpose bonds are becoming more common and issuers are including a greater number of uses of the proceeds in their bond prospectuses.
“Estimated payments on outstanding green bonds in 2023 are 33% compared to the past two years – a relief for issuers after recent interest rate hikes and the sharp depreciation of the Indian rupee seen in 2022,” indicates the BNEF report.
The entry of sovereign and quasi-sovereign issuers has led to increased regulatory oversight of green bonds and the introduction of new products, such as green bond indices and mutual funds.
Source: PTI
