Indian solar and waste-to-energy company SAEL Limited is in talks with the Asian Development Bank for a 12-year loan.

Separately, the company is eyeing a potential acquisition of a 700MW solar power plant to meet its expansion goals.

Proceeds of the ADB loan will be used for 5 of SAEL’s under-construction projects, a source  told IJGlobal without disclosing pricing details.

The loan, in the form an external commercial borrowing format, is likely to be signed in February (2023).

The funding will follow a $60 million equity investment announced last Sunday (15 January) in the North India-based company by the new Norwegian Climate Investment Fund, managed by Norfund.

Norfund’s investment is in the form of Compulsorily Convertible Preference Shares (CCPS) with SAEL having the option to drawdown the amount in a 9-month availability period.

The Indian company, which was formerly known as Sukhbir Agro Energy Limited, plans to drawdown $40 million from Norfund in the next 10 days while the rest – $20 million – will be utilised within the availability period, the source said.

Norfund’s internal rate of return on the $60 million non-cash investment is in mid-teens, IJGlobal understands. Since the investment is in the form of CCPS, the Norwegian fund will derive benefit of higher valuation or return only when SAEL goes public in about 4 years.

Norfund’s investment will contribute to avoiding 7.9 million tons of CO2 emissions and increase air quality by reducing stubble burning.

In northern India, each year farmers burn agriculture stubble in their fields to remove paddy residue, causing severe air pollution in the region.

SAEL uses the crop residue as fuel in its waste-to-energy projects. The Indian company has over 20 projects both operational and under construction in solar as well as the agri waste-to-energy space.

Expansion

The company plans to grow its portfolio to 3GW in the next 5 years, adding 100MW of new biomass and 400MW of new solar capacity annually in addition to its existing portfolio of 600MW.

As a part of its growth strategy, SAEL is looking at asset acquisitions and plans to tap capital markets each year to raise Rs25 billion to Rs30 billion to meet its funding needs.

Currently, it is evaluating the acquisition of a 700MW asset of Solar Energy Corporation of India. “SAEL would know in a week’s time if they can proceed with the acquisition,” said the source.

SAEL doesn’t have an adviser for the potential acquisition, but a local Indian bank is acting as the sell-side adviser.

If the acquisition materializes, it will be the first one for SAEL. The company is planning to fund it by tapping the US dollar bond market provided market conditions remain stable.

In 2022, SAEL planned to raise $235 million from its debut bond sale but had to dump the plan and turn to cheaper onshore funding as dollar bond market turned inaccessible due to rate volatility and geopolitical tensions.

In last week of November 2022, SAEL raised Rs7.5 billion from a maiden 10-year bond sale having a call and put option after year 5, the source said. The bond was solely placed with Infradebt, an infrastructure debt fund promoted by Indian private lenders and:

• ICICI Bank
• state-owned Bank of Baroda
• Citibank Finance India
• Life Insurance Corp of India

The locally AA-rated and unlisted bonds pay a single high-digit coupon. SAEL is planning to raise another Rs6 billion in February (2023).

ADB did not respond to a request for comment.