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CASE STUDY: India’s Rural Electrification Corporation Debuts a US$450mn Green Bond

CASE STUDY: India’s Rural Electrification Corporation Debuts a US$450mn Green Bond

The state-owned company, which finances and promotes power sector projects in India, successfully launched its inaugural green bond, becoming the first Indian public sector corporate to issue USD-denominated “green” debt and supporting the central government’s sustainability drive.


Rural Electrification Corporation is keen to provide affordable and accessible power to most rural parts of the country by 2020 via projects that include solar, wind and biomass assets, as well as sustainable water and waste management projects. In summer 2017 the company was looking to unlock new pools of liquidity and make inroads into sustainable financing with only its second USD-denominated bond, achieving the tightest credit spread to date for an Indian corporate 10-year transaction in the last decade.

Transaction Breakdown

On 29 June, REC, a majority government-owned infrastructure finance company with the aim of financing and promoting power sector projects in India, successfully issued a US$450mn 10-year green bond, with MUFG acting as a Joint Bookrunner.

Prior to the issue, a 3-day roadshow was conducted covering Hong Kong, Singapore and London with a series of 1-on-1 meetings and group luncheons. With strong indication of interest from investors and stable market backdrop, REC decided to announce the transaction early morning with initial guidance of T10+200 area.

With strong demand from Asian accounts, the orderbook reached US$3.3bn in late afternoon, following which the price guidance was revised to T10+170 (± 2.5bp), the tight end of range, and issue size settling at USD450mn.

The deal was 3.9x oversubscribed with over 150 investors taking part, and the final coupon of 3.875% marking the tightest spread to date for an Indian corporate 10-year note.

55% of the notes were placed with fund managers, with another 32% going to sovereign, insurance and pension funds and a final 13% to banks and private banks.

The issue saw significant interest from Asian investors (68% of allocation), with the remaining 32% placed with accounts in EMEA.

Notably, the green bonds have been certificated by the Climate Bond Initiative (CBI), while the “Green Bond Framework” formulated by REC has been verified by KPMG.

This was only the third green bond by an Indian issuer on London Stock Exchange, following in the footsteps of Axis Bank and NTPC, which in 2016 raised the equivalent of US$500mn and US$300mn respectively.


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