Tata Power arm refinances debt via USD 320-million sustainability linked loan

Mumbai: A Tata Power arm has raised USD 320 million through Sustainability Linked Loans (SLL) to refinance its debt.

The SLLs are typically available up to 0.25 per cent cheaper than the conventional loans, finance industry watchers said.

The loan raised by a Tata Power's overseas arm is a three-year tenor loan meant for general corporate purposes. The company has committed to certain Key Performance Indicators (KPI) in order to get the loan recognised as SLL.

"The KPIs include not setting up any new coal-based plant and setting up 2GW of new renewable capacity per year," Sanjay Agarwal, head for India corporates at Bank of America which acted as lead arranger and sustainability coordinator, told PTI.

Agarwal said Bank of America, which has committed towards USD 1.5 trillion in sustainable finance deployment across products by 2030, has also used its balance sheet to take a major share of the USD 320 million of borrowing done by Tata Power.

The loan transaction has a structure under which debt will be cheaper or dearer by 0.05 per cent, depending on the outcomes on the KPIs which will act as an incentive or disincentive, sources said.

There will be an annual measurement of KPIs by accredited agencies during the three years of the loan period, they added.

A Tata Power spokesperson confirmed the development.

"The said loan has KPIs which are linked to the ESG strategy of the Tata Power. Achievement of KPIs will lead to agreed credit spread adjustments. The company's subsidiaries will use the proceeds for refinancing their existing loans," the spokesperson said.

The Tata Power scrip closed 0.86 per cent down at Rs 229.50 a piece on the BSE on Wednesday, as against a gain of 0.09 per cent on the benchmark.