A growing number of renewable energy firms are looking to raise funds via the yuan-denominated bond market outside China, an HSBC Holdings PLC (HBC) banker said recently, after China WindPower Group Ltd. (0182.HK) recently became the first such firm to tap the "dim sum" bond market.

Yuan-denominated bonds have met strong demand in Hong Kong because of expectations the Chinese currency will continue appreciating against the U.S. dollar. Dim sum bonds are yuan-denominated bonds originating in Hong Kong.

However, so far, issuances of such bonds have been limited to just a few sectors--primarily property developers and financial institutions, which account for the bulk of the offshore yuan bond issues to date. Developers have been looking to raise funds outside China amid Beijing's efforts to cool the country's real-estate sector by tightening credit supply.

Robert Todd, director of global banking renewable energy at HSBC's Asian unit, said in a recent interview he expects demand for dim sum bonds issued by renewable energy firms to meet strong demand as investors look to diversify beyond the property sector and financial services.

"Not only Chinese companies, but international renewable energy firms that have operations in China also have an interest in selling offshore yuan bonds," Todd said.

"The dim sum bond market is in a sweet spot with abundant liquidity and tight pricing," he added.

Meanwhile, analysts and company executives say the offshore yuan bond market should be particularly attractive to renewable energy firms as they are likely to face fewer obstacles in repatriating funds than firms in other sectors due to the government's support for clean energy.

China maintains tight controls on its capital account and allows yuan remittances on a case-by-case basis. Bankers have said the uncertainty surrounding repatriation is a major concern for potential yuan-bond issuers.

China WindPower is one example of the sort of treatment renewable energy firms might be able to expect.

The company received approval to repatriate yuan funds this week, a little more than month after it completed its CNY750 million dim sum bond deal in March, said China WindPower Executive Director Samantha Ko.

Bankers said some companies in other sectors have had to wait several months before being allowed to repatriate funds.

China Power New Energy Development Co. (0735.HK) became the latest renewable energy firm to raise funds via an offshore yuan bond when it sold CNY500 million worth of three-year offshore yuan bonds Friday. The company said earlier it plans to remit funds to China to finance its clean energy projects there, though it didn't say whether the process has been approved.

"The trend of increasing issuances and a growing variety of issuers is likely to continue due to the cheaper cost raising yuan funds outside China and the large amount of idle yuan liquidity looking for investment tools with higher returns," said Fitch Ratings Asia-Pacific Senior Director Kalai Pillay.

-By Fiona Law, Dow Jones Newswires; 852-2802-7002; fiona.law@dowjones.com