NYSE-listed Azure Power has raised close to $500 million from a sale of bonds to overseas investors, but a similar offering of notes by rival renewable energy company Continuum Energy failed to attract investor interest, people in Athe know said. The sale of bonds by Delhi-based Azure Power — which is building a portfolio of solar power generating plants across 18 Indian states and has 1.1 gigawatt of capacity under construction — is said to have attracted bids for $1 billion, or two times the size of the offering.
The notes will offer a yield of a little over 5.5% to investors. JP Morgan, Barclays and HSBC acted as arrangers to the sale. Singapore-based Continuum Wind Energy is backed by Morgan Stanley and owns wind generating assets in India.
It was attempting to raise $385 million. Both Continuum and Azure Power did not respond to emailed queries as of press time Thursday. Azure Power bonds were issued by a wholly-owned subsidiary of the firm.
Proceeds from the sale will be used to finance the purchase of rupee-denominated non-convertible debentures and loans of a group of companies that house individual power generation assets of the parent company, Azure Power Global, the company had said.
Though numerous renewable energy companies have raised money overseas, signalling appetite for credit of Indian companies, this has largely been to refinance existing borrowings and is some time more expensive than borrowing locally, industry experts said.
“A lot of this money is being used to diversify the borrowing profile by replacing existing rupee borrowings with foreign currency debt,” a senior executive with a leading private sector bank said. This also helps bank lines to be “freed up to lend further as the renewables sector has large amounts of capital expenditure planned and banks are already overexposed,” the executive said on condition of anonymity. The notes issued by Azure Power were provided given an expected rating of BB- by Fitch on July 18.
The rating is three notches below BBB- which is considered investment grade. Sub-investment grade ratings reflect higher corresponding credit risk. Fitch said its rating on the company was determined by a number of drivers including the diversified geographic presence of the solar power assets and secure power purchase agreements with financially robust entities such as NTPC and Solar Energy Corporation of India.
Continuum’s failure to raise a lower amount of money was attributed to the weak credit profile of its customers, namely state electricity boards in Madhya Pradesh and Maharashtra, where its wind energy plants are located. The company had appointed Deutsche Bank and Credit Suisse to arrange the proposed sale of its bonds.
Mauritius-headquartered Greenko had raised as much as $1billion through a sale of bonds a little over a week ago, signalling investor interest in Indian renewable energy companies that have largely succeeded in raising funds overseas. ReNew Power also had raised $475 million through a bond issue earlier this year.