Oooh India!! Yes Bank going for India’s first green bond / India’s amazing renewables buzz / Minister asks “how can we help?” – that’s the kind of Minister we want / Indian Green Bond Mkt Dvlpt Cttee

Monday. I’m in Delhi, in the bowels of the old, once-splendid Ashok Hotel, caught in a scrum of people trying to get our RE Invest conference registrations.  “I guess it’s just crowded India” I think, then the guy behind the desk tells me they’ve had twice as many registrations as expected for this year’s conference, and people are still coming in. Ahhh.

There sure is a buzz in India about renewables. The Modi Government has set a huge target of 165 Gigawatts of new renewables by 2022. India isn’t famous for meeting such targets, but even halfway would be incredible. Prime Minister Modi is relying on his reputation for pushing solar when he was Gujarat Premier to assuage doubts. The government says they need and want private capital to finance the roll-out (having Government Ministers courting private capital is a bit unusual for India).

In a Tuesday forum Yes Bank’s Sanjay Madavkar said $100 billion will be required to meet the target: $30 billion equity and $70 billion debt.

In the same forum Tom Heller of the Climate Policy Initiative noted that, because of a mix of regulatory and economy management factors, “India has a system biased against debt”. As a CPI paper by the talented Gireesh Shrimani makes clear, low cost debt will be critical to the financing of India’s renewable revolution. Tom: “We need a system biased towards debt to reduce the cost of capital for renewable energy”

Mobilizing domestic capital is the key to any country’s low-carbon transition. This is especially the case in India with relatively volatile currency - the cost of hedging against foreign exchange risk makes foreign investment a real challenge. Mind you, some foreign exchange relief is around, with ADB and the USA’s OPIC both providing hedging tools.

But the local bond market needs a push.

We do have a project to help. Hosted by the Federation of Indian Chambers of Commerce and Industry, we’re organizing a Green Bonds Market Development Committee that will make policy recommendations to the government, engage institutional investors and support demonstration issuance. Members come from development and commercial banks, clean energy developers, infrastructure companies and industry associations. A formal announcement will come soon.

Back to the scrum: the energetic Indian Minister for Power, Piyush Goyal, hung around for most of the conference, talking talking talking. He keeps saying “tell us what we need to do”. In front of a clutch of TV cameras I told him one thing would be to issue sovereign green bonds and allocate the proceeds to reducing capital costs for renewables finance. “Yes, but a banker told me today we’ll have to pay more if we issue a green bond.” “Wrong wrong wrong” (that errant banker needs to be better briefed). And so “Come and meet”. For Paris at the end of the year perhaps?

---

But now to the big news: India’s first green bond!

Yes Bank announced India’s first Green Bond, with a maturity of 10 years. The formal announcement was that the bond would be for INR 500 Crores ($80m), but the right to “retain oversubscription” was noted. CEO Rana Kapoor said to me that in fact he thinks it will close for a minimum of 930 Crores ($150m) and he’s hoping they will get closer to INR 1,550 Crores ($250m). Yes Bank is the country’s 4th largest private bank.

According to the Information Memorandum, funds raised will be used to finance renewable energy (solar, wind, hydro, biomass), although the media release also mentions energy efficiency projects. The Indian credit rating is AA+ (roughly equivalent to BB+ in international ratings). 8.85% coupon.

Internal tracking of loans will be done as per the Green Bond Principles, and KPMG will do an annual audit of the deployed funds. So far we can't see an independent review of green credentials; we'll report back after the bond closes late next week.