SBI Rooftop Solar Refinancing #2
Project Description
This summary covers a proposed investment by lender(s) yet-to-be identified (the “Guarantee Holder(s)”) to provide a non-shareholder loan to the State Bank of India (“SBI”), an Indian state-owned enterprise bank, to refinance the remaining balance of US$163 million of the existing US$500 million World Bank (“IBRD”) loan to SBI for already operational Grid-connected Rooftop Solar Photovoltaic (“GRPV”) systems. The IBRD’s Grid Connected Solar Rooftop Program (P155007) was approved in 2016 (the “IBRD Loan”) and extended to SBI. The objective of the IBRD Loan was to provide funding for on-lending by SBI to commercial and industrial customers across India as part of a national program to deliver GRPV systems. MIGA signed contracts of guarantee with Citibank, N.A., Standard Chartered Bank and Credit Agricole Corporate and Investment Bank on April 24, 2024 to refinance the remaining US$200 million of the IBRD Loan (SBI has repaid US$137 million to IBRD). The project is the second transaction with SBI with the same use of proceeds under the GRPV program after the successful closing of the first transaction in 2024.
The proposed project responds to the 2018 report “Making the Global Financial System Work for All” by the G20 Eminent Persons Group on Global Financial Governance and the G20 Capital Adequacy Framework review “Boosting MDBs’ investing capacity” which call for multilateral development banks and MIGA to collaborate on transferring portfolio risk from MDB balance sheets with MIGA’s insurance products, and highlight the more prominent role MIGA could play in supporting financial capacity within the World Bank Group (“WBG”). The same is further articulated in the WBG’s Statement in the Evolution Roadmap. The Project represents the continuation of “originate to distribute”, a concept that embodies MIGA and IBRD working in concert to free up IBRD’s lending capacity, thereby enabling IBRD to undertake new initiatives in India.
The MIGA guarantee is requested for up to US$313.5 million, comprising loan principal, future interest and potentially MIGA premium, for a term of up to 11 years against the risk of Non-Honoring of Financial Obligations by a State-Owned Enterprise (NHFO-SOE).
Environmental Categorization
The MIGA guarantee will support the refinancing of operating rooftop solar projects in India. During the operations phase, rooftop solar projects are considered to have low to moderate E&S risk impacts related to occupational health and safety, waste management, and community safety. These risks and impacts can be addressed through mitigation measures, and as such, the MIGA project has been categorized as FI-2 in accordance with MIGA’s Policy on Environmental and Social Sustainability (2013).
Under the IBRD program for the initial financing, E&S requirements related to the management of risks and impacts such as occupational safety, fire safety, water consumption, regulatory compliance, and grievance management were specified for SBI by the IBRD. The implementation of these requirements has been monitored over the years by the IBRD. In line with MIGA’s Policy, for this transaction as with the 2024 transaction, MIGA will rely on the E&S requirements specified by the IBRD; no additional requirements will be specified and MIGA will continue to monitor the project in line with the existing requirements.
Development Impact
The MIGA guarantee will help to mobilize private sector capital for SBI enabling the recycling of the sovereign guarantee for other IBRD projects in India and leading to potential savings for SBI. The MIGA-guaranteed loan would be consistent with supporting an important climate finance project aligned with India’s net zero goals. Replacing an IBRD loan with international private capital backed by MIGA’s guarantee is expected to encourage international commercial banks to engage in similar transactions going forward in India and other countries. The proposed project is consistent with India’s Country Partnership Framework FY18-22, extended by the 2023 Performance and Learning Review to end-December 2024, in which MIGA’s credit enhancement guarantees for mobilizing private capital and meeting the borrowing requirements of state-owned enterprises for infrastructure projects are explicitly mentioned.