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Green energy to get Rs 25,000-cr private equity plug

According to reports, private equity investors are expected to invest Rs 25,000-30,000 crore in green energy projects.

Gujarat, Rajasthan and Karnataka are likely to benefit as these States are close to finalising norms to promote green energy ventures.

Industry estimates are that about 10,000 MW of renewable energy projects will come up with investments of about Rs 60,000 crore in three years. Of this, solar alone is expected to account for Rs 13,000 crore for 1,000 MW.

Mr Vinayak Mavinkurve, Group Head, IDFC Project Finance and Principal Investments, said private equity will increase with the launch of more projects. “If one excludes private sector utilities such as Torrent, Adani, Tata Power and CESC, most other developers are primarily funded through private equity or IPO. More than 50 per cent of the proposed funding for new projects could be through private equity,” he said. IDFC has funded renewable and clean technology projects worth close to $1 billion (over Rs 5,000 crore).

The renewed focus on solar projects and the excess solar cell production capacity overseas have led to a sharp fall in solar power project cost. The capital cost for one MW of solar power has come down to Rs 9 crore from Rs 15 crore in 2011. Tariffs have also fallen to Rs 9.40 per unit from Rs 17.90.

Investors find green projects a safe bet given the various delays plaguing other infrastructure projects including government approvals.

Mr Mavinkurve said private equity investors are drawn to green projects because of the predictable returns, generation-based incentives and expectations of an upside in REC (Renewable Energy Certificate) market.

The way fossil fuel costs are rising, power from renewable sources could soon become cheaper than thermal, he said.

The rising losses of State electricity boards (SEB), which buy power for distribution, could be a major worry as green energy is sold at a premium. However, mounting losses have led to SEBs increasing tariffs to match procurement costs.

About 20 States, including Gujarat, Maharashtra, Delhi, Andhra Pradesh, Uttar Pradesh, Madhya Pradesh, Tamil Nadu, Rajasthan, Punjab and Odisha, have raised tariffs in the last 18 months.

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