Rural Electrification Corporation Limited (REC Ltd) Received A Green Loan Of Japanese Yen (JPY) 60.536 billion
Rural Electrification Corporation Limited: Rural Electrification Corporation Limited (REC Ltd) and a Maharatna Central Public Sector Enterprise under the Ministry of Power, Government of India, has successfully secured a green loan totalling Japanese Yen (JPY) 60.536 billion, equivalent to approximately Rs 3,200 crore. This loan is aimed at financing eligible green projects in India while boasting an 80% guarantee by SACE under their innovative Push Strategy programme. The loan received participation from various banks across Asia, the US, and Europe, including Crédit Agricole CIB, Bank of America, Citibank, KfW IPEX-Bank, and Sumitomo Mitsui Banking Corporation as Mandated Lead Arrangers. Credit Agricole CIB plays a key role in the transaction as the ECA Coordinator, Green Loan Coordinator, Documentation Bank, and Facility Agent, highlighting the significance of this green loan initiative in facilitating sustainable development projects in India in the upcoming years. Established in 1969, REC Ltd finances rural electrification projects in India. It supports state electricity boards, governments, and private utilities. Listed on BSE and NSE since 2008, REC’s loan book reached Rs 4.97 lakh crore, with a net worth of Rs 64,787 crore by December 2023.
Green Loan
Green Loan Explained in A Simple Manner
A green loan is a financial instrument that allows borrowers to use the proceeds exclusively for funding projects that make a significant contribution to environmental objectives. Similar to green bonds, green loans raise capital for projects with environmental benefits, but they are typically smaller in size and conducted as private transactions. The Green Loan Principles, established by the International Capital Market Association (ICMA), provide a framework for structuring green loans. These principles ensure that 100% of the loan proceeds are allocated to environmentally beneficial activities and require clear communication from the borrower regarding project evaluation, selection processes, and management of proceeds. Green loans are crucial for aligning lending practices with environmental goals and enabling borrowers to communicate their commitment to sustainability. They offer a viable financing option for projects that may not meet the requirements for issuing green bonds, such as smaller-scale initiatives in emerging markets. By adhering to the Green Loan Principles, borrowers demonstrate their dedication to transparency and accountability in environmental financing. IFC, as a leading provider of green loans in emerging markets, adopts the Green Loan Principles to assess the environmental impact of projects and ensure alignment with international standards. Through independent second-party opinions, IFC evaluates the proposed use of proceeds and verifies compliance with the principles. Additionally, IFC requires annual reporting on the allocation of loan proceeds and impact indicators to track the environmental benefits of green loans.
What is REC Ltd’s recent green loan achievement?
REC Ltd, a Maharatna PSU under the Ministry of Power, secured a green loan of JPY 60.536 billion (approximately Rs 3,200 crore) with an 80% guarantee by SACE. This funding aims to support eligible green projects in India.
Who participated in this green loan initiative?
Various banks across Asia, the US, and Europe, including Crédit Agricole CIB, Bank of America, Citibank, KfW IPEX-Bank, and Sumitomo Mitsui Banking Corporation, participated as Mandated Lead Arrangers.
What role did Credit Agricole CIB play in the transaction?
Credit Agricole CIB acted as the ECA Coordinator, Green Loan Coordinator, Documentation Bank, and Facility Agent.
