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YES Bank catalyzes market for green infrastructure bonds
Chito Santiago 1 Mar 2015

YES Bank, India’s fourth largest private sector bank, on February 16 announced that it will raise 500 crores rupees (US$80.40 million), plus green-shoe, through the issuance of India’s first ever green infrastructure bonds. The 10-year bonds will be used by YES Bank to finance green infrastructure projects in renewable energy and energy efficiency projects, including solar power, wind power, biomass and small hydel projects. KPMG in India will provide the assurance services annually on the use of proceeds in line with the green bond principles.

YES Bank managing director and CEO Rana Kapoor said in a statement the launch of India’s first ever green infrastructure bonds reinforces the bank’s responsible banking ethos and further cements its status as a pioneer in green energy financing in India.

Green bonds are new to Asia with the South Korean policy bank, Export-Import Bank of Korea (Kexim) launching the first transaction from the region in February 2013 amounting to US$500 million. It was followed by Advanced Semiconductor Engineering (ASE) of Taiwan in July 2014 for US$300 million – the first green bonds from Asia’s corporate sector.

At the First Renewable Energy Global Investors Meet and Expo hosted by the ministry of new and renewable energy, YES Bank was the first bank to have made a commitment of funding 5000MW of renewable energy projects and the funds will be utilized towards meeting this commitment. It also made a commitment of funding clean energy projects at the United Nations Climate Change Summit 2014. The bond issue comes on the back of a record US$1.2 billion capital raised by YES Bank in 2014 through multiple transactions including a US$500 million funding in May, US$422 million syndicated loan in October and US$200 million loan from the Asian Development Bank in December.

In January this year, YES Bank signed a memorandum of understanding for US$200 million with Overseas Private Investment Corporation (OPIC), a US government development finance institution, and Wells Fargo to explore financing to micro, small and medium enterprises (MSMEs).

YES Bank notes that given the Indian government’s focus on the country’s renewable energy potential and target of 175GW of additional capacity installation by 2022, it is estimated that the renewable energy sector will require significant financing.

Currently, it points out, there are a number of challenges in the existing financing mechanisms including sector limits, high interest rates and asset-liability mismatch and, therefore, there is a need to evolve innovative financing mechanisms to aid projects in the renewable energy and energy efficiency space. Green infrastructure bonds are one such avenue to allow for financing to flow to vital green energy projects, the bank adds.

Globally, green bond issues amounted to almost US$35 billion worldwide in 2014, while the market in India is still nascent or non-existent. The first such green (infrastructure) bond issuance by YES Bank will catalyze the market for green infrastructure bonds in India and allow responsible investors to facilitate funding towards renewable and clean energy projects.

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