As India gears up to meet its ambitious renewable energy targets of 175 GW of installed capacity by 2022, the country is exploring international mechanisms of funding and is evaluating new and innovative tools to finance the renewables sector.
As a step in this direction, Indian public sector giants are likely to examine rupee denominated debt instruments like Masala Bonds to create and develop a new market and identify benchmark prices for these new instruments. The issuances which would be offered by blue chip government companies are expected to help evolve new vistas of funding for the renewable energy space.
In 2015, IFC issued the first Masala bond listed on the London Stock Exchange. The bonds worth over Rs 1000 crore were issued in a range of tenors, including a ten-year, 10 billion rupee-denominated bond to raise funds for infrastructure projects. Masala bonds are primarily rupee denominated bonds issued to overseas buyers
“Companies including NTPC, Neyveli Lignite Corporation, Power Finance Corporation, Power Trading Corporation and Rural Electrification Corporation are likely to launch these Masala Bonds totalling $1 billion in the next three or four months in the UK to gauge the investor appetite.
The tenor of these bonds is likely to be limited to a band of five to seven years and these are going to be in smaller denominations ranging from $150-250 million. These will be subject to decisions made by the Boards of the PSU energy companies.
In addition, Energy Efficiency Services Limited could explore issuance of Green Masala Bond subject to credit rating,”said Piyush Goyal, Union Minister of State (IC) for Power, Coal and New and Renewable Energy, Government of India.
Held an investor meet at London Stock Exchange. Immense interest in India's energy sector. pic.twitter.com/L66AYhm0r4
— Piyush Goyal (@PiyushGoyal) April 20, 2016
Goyal was speaking at a Round table, “Financing Renewables and Energy Efficiency” organized by the City of London in London on April 20.
Talking about the changing landscape the Minister said that several measures are being taken to address the risks in the system one among them the distribution reform UDAY. This is expected to hard stop future losses for distribution companies and is targeted to get these companies back on track.
While some of these companies are likely to be revived sooner the entire distribution segment should be on track by 2019.
Goyal also announced that IREDA is coordinating a billion dollar equity fund perhaps the largest in the renewable space. This will be professionally managed by an independent international fund management company. Indian public sector companies gave already committed $ 315 million.
Building up on the agreements made during visit of Prime Minister Narendra Modi to the UK in November 2015, Goyal visisted the UK on 19-20 April, 2016 to strengthen India-UK collaboration on power and renewable energy. The Minister was accompanied by an official delegation which included Secretary, Ministry of New and Renewable Energy, Joint Secretary, Ministry of New and Renewable Energy, Director (Technical), IREDA and nine member business delegation.
On the first day of the visit, the Minister met officials from Natgrid and UK Power Network who briefed the Minister about their functions and capabilities and on how they can contribute on enhancing grid stability in India. The Minister explained about his plans and vision to increase the power generation in India and renewable energy scale up plan has been drawn up to 2022.
Goyal also met Lord Bourne, UK Minister for Energy and Climate Change and discussed about enhancing future cooperation between India and UK in the energy sector. The Minister also met Lord Jim O’Neill, Commerce Secretary to the Treasury and Nick Hurd, Minister, Department of International Development and discussed about enhancing bilateral relationship particularly in the power sector.
He emphasised the need for the developed world to show its commitment towards climate change by putting money in climate finance and mentioned that India needs low cost long term finance for its ambitious renewable energy scale up plans and finance hubs like London could take a front seat in mobilising it.
Goyal also emphasised on the historical, cultural and financial ties between India and the UK and hoped to work on it expeditiously to strengthen and deepen the bilateral engagement. The Minister met the media during the visit and briefed about steps the Indian Government is undertaking to improve energy access, rapid scale up of renewable energy, enhancing grid reliability, integration of renewables in the grid and the massive opportunity presented by the untapped demand in the Indian market.