According to reports, renewable energy producer Green Infra Ltd is in advanced talks with investors to raise $150 million (around Rs. 822 crore today) and expects to close the transaction over the next 30 days.
The investors will include both local and global investment firms, said managing director and chief executive Shivanand Nimbargi. The money is being raised to fund the firm’s projects as well as expansion plans.
“We currently have generation capacity of about 300 megawatts (MW). We need $150 million for further expansion. We are eyeing generation capacity of 1,000MW with this round,” said Nimbargi, who declined to disclose the names of the companies that will invest in Green Infra in this round, citing confidentiality agreements.
The funding will be separate from the $50 million debt facility that IDFC Private Equity-backed Green Infra recently received from International Finance Corporation (IFC), the private sector investment arm of the World Bank and Standard Chartered to build two solar power plants in the country.
“It’s (the $150 million transaction) a structured fund raise, with debt and equity components,” said Nimbargi, adding that they could also look at acquisitions to trigger further expansion though valuations are a challenge right now. “We hope valuations to settle down in a quarter or two. We are likely to see consolidation in this industry; there are a lot of small capacity plants,” he said.
Meanwhile, Green Infra will look at raising another funding round in six to nine months, which could be bigger than the current round. It is considering going public in 2015.
Green Infra’s future plans include becoming a 5,000MW renewable energy company by 2015 with operating assets of 3,000MW plus 2,000MW in development. It will largely be through wind energy, followed by hydro, solar and biomass.
It is also working on off-grid applications as well as solutions for telecom towers and is looking at repowering of wind turbines, for which it is awaiting a clear policy. “We are looking at repowering of wind turbines and we have identified farms that can be redeveloped,” said Nimbargi.
In the meantime, PE interest in energy firms was substantial in 2012, particularly for wind power development. Energy companies raised $478 million across 20 investments last year, according to estimates of Venture Intelligence, a Chennai-based research services firm on private company transactions.
The largest transaction in this space was Morgan Stanley Infrastructure Partners’ investment of $210 million in Continuum Wind Energy, a wind energy firm, for a majority stake. Over 2012, PE firms invested $8.9 billion over 406 deals, compared with $10.4 billion across 483 deals in 2011.
India has an installed capacity of 174,361MW. According to the Central Electricity Authority (CEA), in the fiscal year 2010-2011, India’s energy shortage was 8.5% and its peak shortfall was 9.8%. CEA has projected an energy shortfall of 10.3% and a peak shortage of 12.9% for fiscal 2011-2012. The International Energy Agency estimates India needs an investment of at least $135 billion to provide universal access of electricity to its population.
Experts say as policy uncertainty and issues such as a shortage of coal have reduced the appetite of investors for non-renewable energy producers, investors are looking at renewable energy for investment opportunities. The investments in this sector, however, are not without their share of challenges.
These businesses tend to be very capital intensive, said Praveen Chakravarty, chief executive of Anand Rathi Financial Services Ltd. “Though deals are often large ticket, it is because these companies soak up a lot of capital. It does not mean appetite is huge or returns are high. It is too early to say if returns can be made,” Chakravarty said.