Is Covid-19 a blessing in disguise for green energy companies?


MUMBAI: Indian green bonds are very much in demand overseas these days. In the past three weeks, yields plunged up to 216 basis points, lowering funding costs significantly for the likes of Adani Green, ReNew Power, Greenko, and Azure Power.

During the same period, US benchmark Treasury yield, the metric used to price overseas bonds, fell just nine basis points.

Google’s largest green bond sale primarily triggered investor interest in these bonds.

“Demand for credible green papers from India are seeing strong appetite,” said Rahul Banerjee, CEO at BondEvalue, a Singapore-based firm. “Covid 19 has brought green and sustainability to the forefront of investors. Everyone wishes to create an impact via their investment allocations.”

To be sure, India’s green energy sector received a big setback when Softbank and Bharti backed SB Energy’s maiden bond sale that aimed to raise $600 million from global institutional investors was pulled out on July 13, following a lukewarm investor response, ET reported earlier.

But a persistence focus on environment sustainability allayed global investor apprehensions.

Since July 13, Indian green bond yields on an average dropped 97 basis points in the offshore secondary market, show data from BondEvalue. Two particular series of Greenko and ReNew Power bond prices surged, with yields sliding 216 and 208 basis points since July 13.

A basis point is 0.01 percentage point.

Adani Green, rated BB+ by Fitch, saw yields dropping up to 53 basis points. Azure Power bonds yielded 71 basis points lower. Adani bonds are trading at a premium among a few others.

“Many countries are aiming for a green recovery from the COVID induced recession,” said Sandeep Bhattacharya, India Project Manager at Climate Bond Initiatives, an international certifying agency. “There may be policy (i.e .central bank ) induced liquidity in the markets, which as a part of the recovery is supporting green bonds.”

Government-backed Indian Railways Finance Corp, Power Finance, and Rural Electrification Corp have also seen their secondary market yields fall. This means that when these companies tap the market for new fundraising bonds will be priced in proportion to secondary market levels.

In July, RBI governor Shaktikanta Das said the country now needs to move to the next stage of investment and manufacturing in the renewable energy sector.

The share of renewable energy in the country’s total installed capacity has doubled to 23.4% from 11.8% five years ago.

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