Public Sector Energy Blue Chips Companies Likely to launch Masala Bonds

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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.

“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 Shri Piyush Goyal, Union Minister of State (IC) for Power, Coal and New and Renewable Energy, Government of India. He was speaking at a Round table, “Financing Renewables and Energy Efficiency” organized by the City of London in London today.

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

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. Shri 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.

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