ReNew Power to raise $460 mn in green bonds to finance domestic debt

ReNew Power is in the market to raise $460 million through green bonds in rupee equivalent to finance its domestic debt, according to multiple sources familiar with the matter.

The bond issuance will happen through an orphan special purpose vehicle (SPV) — a structure where a foreign portfolio investor (FPI) will raise $460 million in dollar debt from global investors. ReNew Power will issue rupee bonds to this FPI for the full amount. In such an orphan SPV structure, the FPI doesn’t have any relationship with the company issuing the rupee bond.  

The FPI — in this case India Green Energy Holdings — had to communicate in advance its intention to invest in India under the voluntary retention route (VRR). Under VRR, an FPI gets certain advantages over others, like getting more investment limits over and above the regular route.  

ReNew Power this way gets shielded from exchange rate volatility, while the FPI hedges its exposure.  

JPMorgan, Barclays, and HSBC are lead managers for the book, said sources.  

This is not the first time an orphan SPV model has been followed. ReNew Power itself followed it in October, when it raised $325 million. The bids received were close to $2 billion.  

A source said this model is gaining traction among global investors, particularly impact funds in the environmental, social, and corporate governance space.  

While the Covid pandemic-related dislocation is still on, renewables have seen strong interest among investor communities, unlike sectors hit directly by the contagion, such as hospitality and aviation.  

“Huge liquidity is sloshing around globally, but there is not much opportunity to invest in. Rates have crashed overseas, even for high-yield bonds,” said a source.  

In October, the funds were raised at 5.375 per cent — at least 100 basis points lower than what the company could have expected to raise, added a source.

Ready Primer

Green Bond

· It is a type of fixed-income instrument specifically earmarked to raise money for climate and environmental projects

· These bonds are typically asset-linked and backed by the issuing entity’s balance sheet

Orphan SPV

· Orphan structure or orphaning are terms used in structured finance closely associated with creating SPVs for securitisation transactions

· The notional equity of the SPV is deliberately handed over to an unconnected third party with no control over the SPV

Voluntary Retention Route

· The route provides FPIs with a new channel of investment

· In broad terms, investments through this route will not be subject to macro-prudential and other regulatory norms applicable to FPI investments in debt markets through the existing general investment route