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Loss for big power projects is gain for renewables

According to reports, policy hurdles for big power projects are proving to be blessing in disguise for small renewable energy projects. Domestic lenders are turning to these green ventures to grow their books, as many big projects in the non-renewable sector continue to face operational bottlenecks.

Banks have funded several projects in the renewable energy space, especially special purpose vehicles formed by private equity firms over the past few months.

Both Wind Farm, a project of Continuum Wind Energy and Orange Renewable Power are some of the private equity firm-backed SPVs that have secured funding from banks. With several mega power projects stuck in policy wrangles, banks are betting on these low-risk ventures.

According to the data collated by the Reserve Bank of India at the end of March, 284 projects worth Rs 15.6 lakh crore were under the consideration of the project monitoring group, set by the prime minister last year, to revive stalled infrastructure projects.

“We have funded seven to eight projects in the wind energy segment and disbursed about Rs 5,000 core in the last seven months,” a senior SBI official said. “Many of these projects enjoy government incentives, which make them lucrative for investors,” he pointed out.

Firms like the Hero Group and Wellspun group are some of the other firms that have invested in both wind and solar projects. Sovereign wealth funds of France and Abu Dhabi have also invested in this space.

Official data shows there has been a slight drop in the number of stalled infrastructure projects. However, 15-20 per cent of these projects, mostly in roads, power and petroleum sectors, have reported additional delays, as the dates of completion have been extended further.

India’s renewable energy (RE) potential is estimated to be over 3,000 GW based on the existing identified resources. While RE sources have been harnessed for electricity generation in India for the last three decades, only 29.8 GW has been tapped so far. The government of India has set a target to generate 15 per cent of total power consumption from renewable sources by 2022, up from the five per cent at present.

Rajan Dhawan, executive director of Bank of Baroda, said, “We have funded some wind farm companies. Some of the groups that bank with us are getting into wind energy, as they find it a good source of alternate income.” Solar energy projects are coming up in Rajasthan and Gujarat while most of the wind energy projects are located mainly in Maharastra, Andhra Pradesh, Karnataka, Madhya Pradesh and Tamil Nadu. Parthasarathy Mukh­e­rjee, president (large corporates and international business) at Axis Bank, said: “We are evaluating proposals in the renewable energy sector. These are clean loans and carry relatively less risk.”

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