India’s JSW Steel issues sustainability-linked bond

Indian private-sector steel producer JSW Steel has raised $1bn through a bond issuance, which included a tranche issued as a sustainability-linked bond (SLB).

The issuance comprised two tranches of 5.5 years and 10.5 years, each for $500mn, the company said today. The 10.5-year tranche was issued as an SLB whereby the company committed to achieving an 'ambitious target' of less than or equal to 1.95 tonnes of CO2 per tonne of crude steel produced by March 2030, it said. This represents a 23% reduction from its 2020 levels.

If the company is not able to meet these targets by March 2030, the pricing on the bonds will be stepped up by 37.5bp for the residual life of the bonds, as per SLB terms.

JSW Steel is 'the first company in the steel sector globally to issue a SLB in a hard currency', it said.

'The target set by JSW is significantly steeper than that committed as per India's Nationally Determined Contributions and is aligned with the Sustainable Development Scenario pathway by way of targeting a 42% reduction of CO2 emission intensity from the base year of 2005,' said Seshagiri Rao, JSW's joint managing director and group chief financial officer.

The International Economic Agency's Sustainable Development Scenario describes the broad evolution of the energy sector that would be required to reach the key energy-related goals of the United Nations, including the climate goal of the Paris agreement. India has set a target to cut total emissions by 30-35pc below 2005 levels by 2030.

'JSW is already operating a 100 t/d capacity carbon capture and utilisation (CCU) project where the captured and refined CO2 is used in the beverage industry. Adoption of this technology at a very early stage gives us a head-start in our plans to scale up its utility in conjunction with blast furnace-basic oxygen furnace in the future,' Rao said.

The company will use the proceeds of the issue for funding capex plans and refinancing debt, it said.

The company plans to [increase steelmaking capacity]( https://direct.argusmedia.com/newsandanalysis/article/2219036) at its Vijayanagar plant by 5mn t/yr to 17mn t/yr, by the financial year ending March 2024. JSW Steel in April concluded a 5mn t/yr expansion at its Dolvi unit in the western state of Maharashtra, taking the plant's total capacity to 10mn t/yr.

By Sumita Layek