Reliance Raises $736 million Green Loan to Fund REC Solar Buy

Reliance Industries, which is in the midst of a massive green energy thrust, has raised $736 million green loan. The purpose of this loan is to bankroll its acquisition of REC Solar Holdings, the Norwegian manufacturer of solar panels.

The loan of $736 million equivalent to Rs.5,540 crore, has been raised via clutch of banks including ANZ, Credit Agricole, DBS Bank, HSBC and MUFG. These banks have participated pro-rate in the overall facility. The entire borrowing of $736 million will be split into a number of granular portions of debt.

For example, there will be a $250 million term loan with a tenure of 6 years. In addition, there will be $150 million working capital facility provided by the banks. 

There will also be a $460 million bank guarantee (an off balance sheet item) valid for a period of 5 years. This has been syndicated by the clutch of 5 banks as mentioned above with respective allocations made to each of the banks in the consortium.

The term loan component of the funding facility will carry an interest cost of around 125 basis points above the London Interbank Offer Rate (LIBOR). It may be recollected that Reliance New Energy had bought this stake in REC group of Norway from China National Bluestar for an enterprise value of $771 million. 

The deal overall has a fairly interesting structure. Singapore based REC Solar will be the borrower of this facility. On the other hand, Reliance New Energy, the green energy subsidiary of Reliance Industries, will be the guarantor of the loan.

In its last AGM, Reliance had announced that it would invest $10 billion or approximately Rs.75,000 crore in clean energy over the next 3 years. This acquisition is part of that grand plan. Others like Adani have also announced aggressive plans in green energy.

Check - Highlights of Reliance AGM - 2021

The Reliance game plan will also include an investment of Rs.60,000 crore in 4 giga factories in Jamnagar in Gujarat to manufacture solar cells and modules, energy storage batteries, fuel cells and green hydrogen. 
REC Solar has a legacy of 25 years and has 3 manufacturing facilities.

While 2 facilities to manufacture solar grade polysilicon are located in Oslo, it also has a unit in Singapore to manufacture photovoltaic cells and modules for solar panels. 

Reliance New energy eventually plans to scale up its green energy portfolio from 4 GW to 10 GW per year. Reliance Industries is already the most valuable company in India in terms of market capitalization.