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Indian state-run firms to launch $1 billion masala bonds

20 April, 2016

In an attempt to raise resources for India’s ambitious green energy programme, state-run firms, such as NTPC Ltd, Neyveli Lignite Corp. Ltd, Power Finance Corp. Ltd (PFC), Rural Electrification Corp. Ltd (REC) and PTC India Ltd, plan to issue masala bonds to raise $1 billion, according to a government statement released on Wednesday.

The statement added that Energy Efficiency Services Ltd, a joint venture of NTPC, PFC, REC and Power Grid Corp. of India Ltd, may also explore issuing green masala bond. Masala bonds are rupee-denominated bonds issued to overseas buyers.

India has set a target to achieve 175 gigawatt (GW) of renewable power generation capacity by 2022 requiring a $160 billion investment. Of these, 100GW is the solar power target and 60GW will come from wind power generation.

“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,” an official statement quoting India’s power, coal and renewable energy minister Piyush Goyal said. Goyal is on a two-day visit to London on 19-20 April to discuss India-UK collaboration on power and renewable energy.

In 2015, International Finance Corporation, the private sector investment arm of the World Bank, issued the first so-called masala bond listed on the London Stock Exchange.

In a related development, Indian Renewable Energy Development Agency Ltd, which is helping create the $1-billion alternative investment fund, has received commitments worth $315 million for it. The fund will be managed by an independent international fund management company, the statement added.

The solar strategy is at the heart of the Narendra Modi-led government’s ambitious target to halve the country’s energy imports by 2030. It currently costs between Rs4- 5 crore per megawatt (MW) to set up a solar power project.

Experts welcomed the government’s strategy.

India’s former power secretary Ram Vinay Shahi described the move “as a very positive step in the right direction”.

He added that it should be easy to tap investors in the UK “as most of them would agree to invest in the renewable sector given climate change concerns globally”.

India has been trying to bolster its credentials as the global clean energy champion and has pledged to reduce emissions at the United Nations Climate Change Conference in Paris. India has an installed power generation capacity of 288,665MW, of which renewable energy comprises around 13%, or 38,821.51MW.


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Indian state-run firms to launch $1 billion masala bonds

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