A gush of investment activity has been breezing across India’s wind energy economy in recent months as private equity funds and asset financing companies seek to exploit opportunities in the sector. Investments worth $586 million (Rs 2,637 crore) have already flowed into wind farms in India during January to March this year.
We had discussed earlier this year that most of the fund-raising in Renewable Energy and Cleantech in India is happening in mega project developments and developers.
Investors have also shown a lot of interest in this sector and according to data from Venture Intelligence, $1.5 billion has been invested by venture capital and private equity firms into clean energy developers from 2008 to date. Indian Cleantech sector has witnessed an investment of about $465 million from 2008.
Venture capitalists have raised $24.5 billion since 2009 to invest in clean technology or renewable energy in India, and would like to invest more than a fifth of that capital in solar-energy projects.
According to reports, India is the third most favoured destination globally for investments in the renewable energy sector and will also be a major source of new entrants into the sector, behind the US and China, according to a survey released on Wednesday by global consulting firm KPMG.
The top five targeted countries for renewable energy investment are the US, selected by 53 percent of respondents, China (38 per cent), India (35 per cent) Germany (34 per cent) and the UK (33 per cent),” according to KPMG’s annual survey of global renewable energy mergers and acquisitions titled Green Power 2011.
The Indian renewable energy market has become increasingly dynamic in recent years as a result of strong natural resources, greater accommodation to international investments and a variety of government incentives.
“In India, we see increasing trends towards sustained M&A activity in the renewable space, specifically wind, small hydro, and solar sub-segments going forward. With clear thrust on this space, and a supportive policy and regulatory environment, we see this activity picking up slowly but steadily,” said Richard Rekhy , Head of Advisory, KPMG in India.
“The deal sizes, however, may be smaller (as compared to global benchmarks) to start with,” he added.
“With India it is a combination of factors. There is a portfolio standard on a state by state basis. Developers have the ability to get power purchase agreements due to utility obligations. Then there are the Generation Based Incentive (GBI) and tax depreciation incentives,” said Siobhan Smyth, head of renewables at HSBC.
“You are looking at 15-20 per cent returns depending on the state you look at and the type of assets you are buying.”