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Tata Group's Power arm, Tata Power is raising funds to the tune of $320 million via debt from foreign investors through sustainability-linked loans.
For the unversed, Sustainability Linked Loans are loans that incentivize a borrower's achievement of ambitious, predetermined sustainability-linked goals. The terms of these loans are generally tied to the borrower's ESG (Environment, Social, Governance) performance and generally are 25 bps cheaper than normal loans.
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Tata Power is raising two loans via international subsidiaries: One is a term loan from Bank of America & the other is a club loan lent out by the Bank of America and SMBC. Both loans have dollar denominations and will carry a tenor of three years. It is suggested that both loans will be priced after adding in 125-150 bps over SOFR.
It is also being reported that Tata Power can save up to 8 bps on financing costs if it does not invest in coal power/fossil fuels & if it builds 1.5-2 Gw of renewable energy capacity every year. Moreover, achieving both these performance indicators will allow Tata Power to raise similar loans in the future.
Recently, Tata Motors signed a Power Purchase Agreement (PPA) with Tata Power according to which Tata Power will be developing a 7.25 MW solar plant on the automobile company's Jamshedpur plant.
Brokerages see potential in the company's long-term business as the company is displaying confidence in the growing power sector and its position in it. The share of Tata Power closed at Rs 235.10 per share on Friday, up 2.5%.
Article by Aman Agarwal.
This story is brought to you in association with Jobaaj.com
