Tata Power to Raise $320 Million in Sustainability-Linked Loans
According to media sources, Tata Power is to secure a $320 million loan from international lenders led by Bank of America for sustainability-related projects.
Sustainability-linked loans often allow borrowers to acquire financing at a lower cost of up to 25 basis points, or 0.25%, than traditional loans.
According to the reports, if Tata Power does not invest in or enhance capacity in industries such as thermal power generation over the next several years, it will benefit from a drop in financing rates of up to eight basis points.
To get extra financial incentives, it must also increase renewable energy generation by 1.5 to 2 gigatonnes per year.
Tata Power spokesperson said, "The business will use the profits to refinance and grow in power producing units. The profits will be used by the company's subsidiaries to refinance their current loans. It won't be applied to the addition of new capacity."
Tata Power is acquiring the debt through two foreign entities. One is a club loan, in which Bank of America and Sumitomo Mitsui Banking Corporation are lenders (SMBC). In addition, the former offers a term loan facility.
Major banks such as Societe Generale, HSBC, and Italy's Intesa gave a $700 million sustainability-linked loan to UPL Corporation, the international division of agrochemicals giant UPL Ltd., earlier this year.
According to sources, Bank of America and Citibank each intend to invest $1 trillion in sustainable financing by the end of 2030, while JPMorgan Chase aims to fund and enable more than $2.5 trillion in investment over ten years through 2030.
According to the company's business responsibility and sustainability report, clean and green energy sources account for 34% of the company's capacity (measured in MW) (hydro, wind, solar, and waste heat recovery).
Source: India Infoline News Service