AGEL, India’s leading renewable energy company, has just announced substantial financing for its 750 MW solar projects in the states of Rajasthan and Gujarat. The financing comes from a consortium of five leading international banks, underlining growing confidence in India’s renewable energy market. This new development marks a turning point for “merchant” type projects, once considered risky, and demonstrates the changing banking outlook towards independent energy projects.
Financing Structure and Strategy
The first project in Rajasthan, with a capacity of 500 MW, has been secured with a long-term purchase agreement with the Solar Energy Corporation of India (SECI). The second project, with a capacity of 250 MW at Khavda, is positioned in the world’s largest RE cluster and operates as a merchant project. This diversification of revenue models by AGEL enables sustainable value creation, while optimizing financial flows from traditional and merchant agreements. The financial institutions involved, such as Cooperative Rabobank U.A., DBS Bank Ltd, Intesa Sanpaolo S.p.A., MUFG Bank, Ltd. and Sumitomo Mitsui Banking Corporation, have shown renewed confidence in merchant-type projects, a notable change from their usual cautious approach.
Impact and prospects
The legal and compliance aspects of these financial transactions were handled by law firms of international stature. Latham & Watkins LLP and Saraf & Partners acted for AGEL, while Linklaters and Cyril Amarchand Mangaldas advised the banks. These legal collaborations ensure that agreements comply with international lending standards and green lending principles, which are essential for the sustainability of financing in the energy sector.
Sustainability Impact Assessment
The assessment of the sustainability of the financing was entrusted to Sustainable Fitch, which highlighted the transparency and robustness of the Green Loan framework for the 750 MW solar projects. This aligns AGEL with the four core components of the 2023 Green Lending Principles, furthering AGEL’s commitment to green energy solutions and its alignment with the UN Sustainable Development Goals, in particular MDG 7.
Implications for India’s Renewable Energy Sector
This financing marks a milestone for India’s renewable energy sector, indicating a transition towards more mature and competitive market integration. AGEL, with its operational portfolio of 10,934 MW – the largest in India, including 7,393 MW solar, 1,401 MW wind and 2,140 MW hybrid – continues to play a crucial role in supplying reliable, affordable and clean energy to the national grid. AGEL’s ability to attract international financing testifies to the growing competitiveness and confidence in India’s renewable energy sector, promising a clean energy transition and accelerated decarbonization.
