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Greenko in talks with KKR to raise $100 million

According to reports, London’s AIM-listed clean energy specialist Greenko is in talks with a few leading PE investors, including KKR, for a $100 million investment, said multiple sources aware of the discussions.

The company and its global subsidiaries already boast of several high street investors such as Singapore’s GIC, Global Environment Fund, Standard Chartered Plc backing them up. It even had TPG Capital as one of its earliest backers. Its portfolio of hydropower, wind turbine and biomass operations are spread across India that have grown via acquisitions and investments in green energy sources.

The discussions with KKR have not yet reached any finality and the fund has initiated a detailed diligence on the company’s operations. Sources, however, add that the new investments likely to come at Greenko Energies, the group’s Indian entity, for a significant minority stake in the company.

In February, Hyderabad-headquartered Greenko Energies had acquired a clutch of hydropower assets of Lanco, including the 70 MW Budhil hydropower project and two smaller plants of 5 MW each in Himachal Pradesh for an undisclosed amount.

While a senior executive who did not want to be identified confirmed that KKR was doing due diligence, Greenko founder and chief executive Anil Chalamalasetty said the company is in talks with a few global investors, but refused to divulge their identity. “We are going to add some 400MW of hydel and solar energy capacity every year, which involves a capital expenditure of at least Rs 3,000 crore a year. We need at least Rs 1,000 crore of equity every year from 2015-16 onwards since the requirement for 2014-15 was already raised. Normally, we do a couple of rounds of fund-raising every year to meet requirements at least a year ahead. A few international investors are currently evaluating options to pick up stakes at various vertical levels,” he told ET.

KKR’s India CEO Sanjay Nayyar declined to comment. If it goes through, this would be KKR’s first investment in the renewable space. Since 2006, KKR’s private equity division has deployed $1.6 billion in India across a diverse portfolio of technology, manufacturing, power, consumer and pharma companies.

In its third and biggest round of fund-raising last year, Greenko had raised 100 million pounds of equity investment from GIC. Kameswara Rao, PriceWaterhouseCooper’s energy, utilities and mining leader, said, “Greenko has a very structured development approach, which means the projects it undertakes are stress-tested for profitability, and the company raises funds for new development only when cash flows from completed projects are in sight. This ensures a profitable growth across its diversified renewable portfolio, and so marquee funds are keen to be associated with them.”

“Despite having free cash flows, we keep looking at investors for equity funds, given the capital intensive nature of the sector,” said Chalamalasetty. Currently the company has some 3,000 MW of projects under various stages of development and expects to have close to 700 MW of operational capacity by the end of the monsoon season. The target is to reach 1000 MW of operational capacity by 2015 and double that by 2018.

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