Partial Credit Guarantee
The Indian Renewable Energy Development Agency (IREDA) offers a credit enhancement guarantee scheme to support the issuance of bonds by wind and solar energy project developers. By providing unconditional and irrevocable partial credit guarantees, IREDA aims to enhance the credit rating of bonds for renewable energy projects, thereby improving their marketability and liquidity, and attracting lower-cost and longer-term funding for project developers. The amount raised by credit enhanced bonds shall only serve to repay existing debt partially or fully.
IREDA’s long-term objective is to contribute to the development of a bond market for renewable energy projects in India.
Eligible projects and transactions
Grid-connected renewable energy projects: solar and wind energy.
- Size of coverage: Extension of guarantee up to 25 per cent of the proposed bond issue size, while not being more than 20 per cent of total capitalized project costs of the latest audited balance sheet. Minimum issue size for proposed project bonds: INR 1 billion (≈ USD 15 million).
- Tenor of coverage: Linked to the maturity period of the bond. Maximum tenure is 15 years.
- Guarantee fee between 1.80 and 2.90 per cent per annum of its exposure. Amount based on several factors, such as external rating, bond yields, market conditions, risk analysis and bond tenure.
- Processing fee: Two times 0.10 per cent of IREDA’s guaranteed amount.
- Borrowers have to reimburse all other expenses incurred (external consultants, legal counsel, IREDA’s financial advisor, meetings and travel expenses, service tax).
Other eligibility criteria
- Required debt–equity ratio for the relevant project of not more than 3:1.
- Project in operation since at least one year after the commercial operation date.
- Projects have to be connected to the grid and be commercially viable, delivering a minimum average debt service coverage ratio of 1.2.
- Minimum credit rating (external) of the project/proposed bond structure: “BBB”.
- Project promoters need to prove creditworthiness: no criminal proceeding pending against them and not listed on the defaulters list of Reserve Bank of India (RBI), Credit Information Bureau India Limited (CIBIL).
- The borrower and its subsidiary should not be on the default list of IREDA/banks/financial institutions as on date of application.
- All other eligibility criteria as per financing policies of IREDA. Details: http://www.ireda.in/writereaddata/Annexure%20-%20II.pdf