Tata Power to raise $320 million in loans linked to sustainability

Sustainability-linked loans typically allow borrowers to obtain funds at lower interest rate

August 25, 2022 8:13 IST | India Infoline News Service

According to news reports, Tata Power is securing $320 million in sustainability-related loans from international lenders led by Bank of America.

Sustainability-linked loans typically allow borrowers to obtain funds up to 25 basis points, or 0.25%, less expensively than conventional loans.

According to the reports, Tata Power will benefit from a drop in financing rates of up to eight basis points if it does not invest in or increase capacity in sectors like thermal power generation over the next few years.

In order to receive additional financial incentives, it must also boost the generation of renewable energy by 1.5 to 2 gigawatts annually.

According to a Tata Power spokesperson, in answer to ET's inquiry, "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 accumulating the debt through two foreign entities. One is a club loan in which Bank of America and Sumitomo Mitsui Banking Corporation are both lenders (SMBC). Additionally, the former is providing a term loan facility.

Earlier this year, major banks including Societe Generale, HSBC, and Italy's Intesa provided a $700 million sustainability-linked loan to UPL Corporation, the international division of agrochemicals giant UPL Ltd.

According to reports, Bank of America and Citibank have each set a goal of investing $1 trillion in sustainable finance by the end of 2030, while JPMorgan Chase wants to finance and enable the investment of more than $2.5 trillion over a ten-year period until 2030.

According to the company's business responsibility and sustainability report, the company (including its subsidiaries) has 34% of its capacity (measured in MW) in clean and green generation sources (hydro, wind, solar, and waste heat recovery).

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