Avaada Group Completes $535 Million Refinancing for Renewable Energy Projects in Rajasthan

Avaada Energy has successfully completed the refinancing transaction, securing about USD 535 million from the state-owned National Bank for Financing Infrastructure and Development (NaBFID). This major financial milestone underscores the keen interest of financial institutions in supporting renewable energy projects that offer stable, long-term cash flows.

The refinancing covers four solar projects in Rajasthan, connected to the Interstate Transmission System (ISTS), with a combined capacity of approximately 1700 MW. The funds obtained from NaBFID were utilized to prepay existing loans, facilitating a successful exit for multiple lenders. This 20-year Rupee Term Loan (RTL) facility brings considerable commercial improvements over the earlier facilities that were prepaid.

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This transaction has received an 'AA (Stable)' rating from CareEdge Ratings due to its Restricted Group (RG) structure. It is aimed at enhancing Avaada's sustainable energy initiatives, ensuring stable, long-term cash flows and improved financial health, while significantly contributing to the reduction of the carbon footprint on a global scale.

This refinancing transaction is a significant step forward for Avaada Energy and the renewable energy projects in India. It not only demonstrates the financial viability of renewable energy projects but also the growing commitment of financial institutions to support sustainable initiatives. The successful completion of this transaction is expected to boost the confidence of investors and stakeholders in the renewable energy sector, paving the way for more such initiatives in the future.

What is Project Refinancing?

In the context of projects, refinancing refers to renegotiating or replacing the existing loan terms for a project. This typically involves securing a new loan with different conditions than the original one. There are a couple of main reasons why this might happen:

Interest rates

If interest rates go down overall, then refinancing can be a way to get a lower interest rate on the project loan, saving money on future payments.

Loan terms

Refinancing can also be used to change the terms of the loan in other ways, such as by extending the repayment period, converting a fixed-rate loan to an adjustable-rate loan (ARM), or vice versa.

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