ESG Deal: Sael’s debut US$305m green bond
Indian renewable energy player Sael’s US$305m debut offshore bond sale brought a new variety of ESG paper to the Asian market.
Waste-to-energy can be a controversial subject among some green investors, since power is generated by incinerating discarded matter, but Sael uses the process to reduce carbon emissions that would otherwise be produced.
Parts of India are plagued by smog that is produced when farmers burn crop waste such as paddy straw. Sael repurposes the agricultural waste to generate electricity using highly efficient, state-of-the-art boilers to address pollution concerns.
Although solar remains the company’s dominant business, investor engagement and education were geared towards the waste-to-energy business. The issuer was conscious of the importance of having a green label on the bond, acting as a seal of approval.
Extensive engagement and investor education on the company’s business and the waste-to-energy sector led to final orders of over US$1.85bn – the largest book achieved by a debut Indian high-yield trade and the second-largest for an Indian high-yield bond in 2024.
About 25% of the book came from green funds, showing that the issuer had managed to convince ESG investors about its environmental impact.
The oversubscribed deal was not only Sael’s first offshore issue but also the first out of Asia with waste-to-energy assets.
The amortising seven-year non-call three green bonds have a weighted average life of 5.33 years. Guidance started at 8.125% area, before compressing significantly with pricing landing at par to yield 7.8%.
The debut concession was marginal and, as one banker on the trade explained, strategic – the issuer could have priced tighter but thought it good for its long-term relationship with investors to leave something on the table so the bonds would perform in the aftermarket. They were bid at 100.5 at the end of the year.
A tight structure and solid green credentials are among the traits that drew investors: the bonds follow a project finance style security structure, secured against assets and shares of the five subsidiary co-issuers, and have a cashflow waterfall mechanism. Sustainable Fitch provided a second-party opinion on the green finance framework, labelling it “excellent”.
The 144A/Reg S BB+ (Fitch) rated notes were jointly issued by a restricted group comprising Sael and five of its subsidiaries: Sunfree Paschim Renewable Energy, Sael Solar Solutions, Jasrasar Green Power Energy, Sael Kaithal Renewable Energy and Universal Biomass Energy.
Barclays, HSBC, Standard Chartered and UBS were the global coordinators.
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