CLP Billionaire’s Wind Farms Plan Bond Debut: India Credit

India’s top wind utility is planning its debut debt sale, offering investors a chance to fund an industry that’s forecast to grow faster than the U.S. this year.

CLP Wind Farms (India) Pvt., a unit of Hong Kong billionaire Michael Kadoorie’s CLP Holdings Ltd. (2), said an overseas bond is one option as it seeks to borrow $250 million a year to fund expansion, Managing Director Rajiv Mishra said in a Sept. 27 interview. It now pays project finance rates of about 13 percent, compared with the 3.63 percent yield on the seven-year notes of its parent. The average rate on Asian securities is 4.64 percent, HSBC Holdings Plc data show.

CLP’s plan to back the proposed bond with earnings from multiple wind farms reduces risk and will attract investors, according to SJS Markets Ltd., even after turbine-maker Suzlon Energy Ltd. defaulted on debt payments last year. India will add 2,050 megawatts of wind power capacity in 2013, exceeding increases in the U.S. for the first time, according to a September forecast by Bloomberg New Energy Finance.

“The pooled wind farm assets will be a considerable safe investment, as the company would have enough cash flows to service the debt,” Hemant Dharnidharka, Bangalore-based head of credit research at SJS Markets, said in an e-mailed response to questions on Oct. 3. “The credit rating for such a pool will be better than that which an individual project would attain.”

Bond Advantage

CLP India may issue the bonds in about a year, helped by its agreement last month with its biggest creditors Standard Chartered Plc, IDBI Bank Ltd. and IDFC Ltd. to club its 1,050 megawatts of assets together to create a common revenue pool, said Mishra. That evens out risks from performance variations between individual farms and will allow the firm to earn the minimum B1+ rating required to sell a corporate bond, he said.

CLP India will save on interest costs by selling foreign-currency notes as rates remain relatively higher at home. Top-rated five-year rupee company bonds pay 9.57 percent, data compiled by Bloomberg show. The average yield on Indian dollar debt is 5.94 percent, according to JPMorgan Chase & Co. data.

The advantage of a bond over local-currency loans “is both the cost as well as the certainty,” CLP’s Mishra said. “Any potential lender sees a lot more certainty when it looks at the pooled cash flows than at any individual project.”

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