Adani, Tata Power plan to raise $1.3 bn in green bonds for new projects

Adani Green to launch $1 bn bond by December; Tata Power to raise $320 mn this month

Adani Green Energy (Adani Green) and Tata Power are planning on raising funds via green bonds to finance their new projects. While Adani Green is intent on raising $1 billion via green bonds, Tata Power is in the process of raising $320 million via sustainability-linked loans, say bankers.

Sajjan Jindal’s steel-to-energy conglomerate JSW Group is also in the process of shifting to sustainability-linked longer tenure and marginally low-cost green bonds.

“While Adani Green fund will launch the bonds by December, Tata Power will raise funds in October,” said bankers.

Green bonds are used to raise funds by Indian companies for environmentally-friendly projects, while sustainability-linked loans are used for green transition projects. As Indian companies move away from fossil fuels to more climate-conscious projects, the demand for green bonds and sustainability-linked funding will rise substantially, observe bankers.

Adani Group is preparing the groundwork for investing $70 billion in renewable energy projects in the next decade. Most of the funds will be raised through green bonds.

“Adani’s $1-billion offering will have a 20-year tenure. It will be the first US Securities and Exchange Commission-registered bond out of India,” said a banker, referencing the American securities market regulator.

Reliance Industries, which plans to invest close to Rs 77,000 crore in renewable energy projects, will be in the market soon to raise green bonds, said a banker quoted earlier.

Besides Tata Power planning on investing Rs 75,000 crore in green projects by 2026, other group companies, including Tata Steel, are looking at options to raise cheap funds via sustainability-linked loans, say bankers.

In the first nine months of 2022, home-grown companies have issued green bonds worth $1.79 billion, in contrast with $4.9 billion raised in the same period of 2021.

Volatility in currency markets after the Russia-Ukraine stand-off is adduced to explain companies deferring their issues by six months. Finance heads are of the opinion that this is the best time to go for green bonds because the capital needs of the industry are at unprecedented levels. 

“India lacks this kind of capital availability. This explains why Indian corporates are going for global dollar green bonds. But they have to be extra watchful of foreign currency risk and hedge appropriately," said Prabal Banerji, an international finance advisor and former finance head of Bajaj Group.

According to Moody’s Investors Service, lenders’ exposure to carbon-intensive sectors poses asset risks in the long term, while legal and reputational risks are mounting. For this reason, banks are also trying to modify their portfolio to embrace green projects. 

Across Association of Southeast Asian Nations, 15-30 per cent of bank loans are to carbon-intensive industries, setting a challenging path for banks and borrowers in the middle of pressure from investors, regulators, and social forces to decarbonise loan books, said the credit rating agency.