EESL plans to raise $400 million debt to finance expansion

New Delhi: State-owned Energy Efficiency Services Ltd (EESL) is planning to raise another $400 million from multilateral agencies and international bond markets to finance a massive expansion into rural street lighting, high-capacity energy-efficient municipal water pumps and into overseas markets, managing director Saurabh Kumar said.

EESL is scaling up its operations and is getting into new areas of business to capture what it considers a Rs74,000 crore domestic energy efficiency market, which is largely untapped. The company promoted by public sector firms in the energy sector, NTPC Ltd, Rural Electrification Corp. Ltd, Power Finance Corp. Ltd and Power Grid Corp. of India Ltd, is leading the government’s energy efficiency programme seeking to reduce carbon emissions as part of its climate change goals.

Kumar told Mint in an interview that the company was negotiating a $300 million loan from World Bank and has sought Reserve Bank of India’s permission for issuing a $100 million worth of masala and green bonds in the UK. The funds will be utilized for the company’s expansion into rural LED street lighting, energy efficient municipal water pumps and retrofitting of central and state government buildings. The company is also planning to raise Rs500 crore from the domestic bonds market. All this is for EESL’s planned capital spending of Rs6,000 crore in 2017-18, explained Kumar. “Our funding requirement is getting larger and larger,” said Kumar.

EESL has already raised a 50 million euro loan from French Development Agency (Agence française de développement or AFD), a 250 million euro loan from German government-owned development bank KfW and a $200 million loan from the Asian Development Bank for various projects. These and the loans currently under negotiations carry a four-year moratorium after disbursement before the 12-year repayment period kicks in, giving EESL sufficient time to realize revenue from the projects. EESL follows a model in which the company makes upfront investment for installing and maintaining street lamps as well as for retrofitting buildings and the gains from energy efficiency helps the customer in repayment over a period of time.

“We have signed an agreement with the Maharashtra government, as per which 1500 buildings of its public works department will be retrofitted by us at our cost and it will be paid back over 5 years. Our investment is about Rs300 crore. Also, we have signed agreements with the Indian Railways for retrofitting 900 stations with energy efficient equipment under the same model,” Kumar said.

While the $300 million loan from World Bank may happen in 2018, the bond issue in UK is expected in September.

The massive scale of EESL’s energy efficiency programme has helped in reducing the price of LED lights significantly. LED bulbs procured by EESL for home lighting, for example, have become cheaper by 86% over the last few years from Rs310 a unit to Rs41 a unit now.

EESL is expected to raise its paid-up capital from Rs450 crore to about Rs1,000 crore by infusing fresh capital from promoters, except from Power Grid Corp. of India Ltd, before going public in the next few years.