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Foreign investors queue up to acquire clean energy assets

According to reports, India’s infrastructure sector may be burdened by high debt and slowing growth, but foreign investors are interested in the sector, as not only are valuations attractive, but new opportunities have also arisen in sectors like renewable energy space. Foreign investors, especially long-only funds, and large renewable players are snapping up assets in the sector or setting up projects in India.

Large foreign investors, be it sovereign funds, pension funds or large companies in the renewable energy space, are looking at acquiring operating assets, which are relatively stress free or setting up new projects. Investment bankers say that deals to the tune of $2 billion are in the works and will be announced shortly. Gaurav Gupta, managing director of Macquarie Capital, an investment bank, says: “As more assets get developed and operational, there will be greater interest from long only funds. We see greater interest today than a few months ago. The interest is across sectors – renewables, transportation, etc. I do think we will see deals worth a couple of billion in the next 12 months.”

There is heightened interest in the roads and renewable sector from foreign investors. The Government of Singapore Investment has invested Rs 1,000 crore in Greenko, a renewable energy company based in Hyderabad, a couple of months ago. The company owns and manages renewable energy assets across several Indian states. SunEdison is another American company that owns solar power assets in India and is looking at joint venture partners to set up solar plants in India. In July this year, GE Energy Financial Services invested Rs 257 crore in Gati infrastructure’s hydro power plant in Sikkim. Raja Lahiri, partner for transaction advisory services at Grant Thornton says: “Clean energy is one of the hottest sectors globally and foreign investors are looking at India because the government is in the process of signing a lot of power purchase agreements in the sector”.

A spate of deals is cooking in the pipeline, as the government is looking at signing power purchase agreements and is also giving sops to investors. The government is looking at attracting Rs 90,000 crore in investments through four solar ultra mega power projects. Investment bankers say that solar power companies like First Solar and SunEdison are considering setting up solar power plants in India.

Rahul Gupta, director at Rays Power Experts, which operates and develops solar power plants for its customers, says: “We are in talks with some foreign investors and some investment opportunities are expected to open up in the coming months as the government is expected to sign power purchase agreements in the renewable energy sector. Foreign investors are interested in renewables because the IRR (Internal Rate of Return) works out to 14-15% and even if they hedge for currency risks, the returns are lucrative.” Also, in the renewable space the fuel linkage issues are not there. And the government is fast-tracking approvals and clearances before inviting companies to sign power purchase agreements.

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