According to reports, the International Finance Corporation (IFC) has announced corporate equity financing of up to $15 million (around Rs 69 crore) to Andhra Pradesh-based Shalivahana Green Energy Limited (SGEL), a privately owned entity producing power based on biomass. The fund would be used by the company for its projects.
IFC would also provide up to $15 million in project debt financing to Rake Power Ltd (RPL), a fully owned subsidiary of SGEM, for its 2×23 Mw biomass project. The tenor of the the loan will be up to 12 years with a grace period of three years.
SGEL is 50.1 per cent owned by its promoter M Komaraiah while the balance is held by IL&FS Energy Development Company Ltd (20 per cent) and Axis Infrastructure Fund 1 (29.90 per cent).
The company has an installed capacity of 47Mw spread across five plants. Three new biomass power plants under construction will bring additional capacity of about 45Mw by March 2011.
The company has a pipeline of approximately 200Mw, of which two biomass projects of 23 Mw each (project cost of about $25 million each) will be held in RPL.
The company had earlier raised, Rs.90 Cr ($18mn) from Axis Private Equity and IL&FS Financial Services Ltd (IFIN) in the year 2009. Axis PE has invested an amount of Rs 54 Cr ($11 Million), IL&FS Financial Services invested Rs 36 crore. Back in 2009 the company had four operational projects with an aggregate capacity of about 35MW and had at that time talked about expanding capacity to about 250MW.
It seems like in the last couple of years, the company has commissioned one additional plant with a capacity of about 12 MW which seems to be in line with most expansion plans that Panchabuta has seen and that 200MW of the then announced expansion of capacity to 250MW still remains just that, an expansion plan.
Panchabuta understands that there are numerous challenges in the renewable energy investing space and all risks associated with an infrastructure investment are also applicable here often along with technology issues in some cases like solar.
There are a number of private equity players that have told Panchabuta unofficially that this is sector of interest and there is a lot of interest from their investors and peers to invest in these sectors.
The lack of good deals has made some of these private equity funds back and invest in these rather over ambitious expansion plans and investment ideas without doing a thorough technical and project due diligence instead of just financial due diligence and projections.
Most private equity funds are not aware about the sourcing of biomass in their projects, often ignore the firing of their biomass plants with coal and other such common practices that often happen in India. Further, issues related to the availability pf biomass feedstock at the right price is often overlooked. In the area of small hydro, gestation periods are often much more than that which is projected and though they are clean and green projects, the time lines, procedures and approvals are almost similiar to that of a thermal power project.