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PE  firms’ interest in renewable energy sector remains high

According to reports,  despite a lull in private equity investment in infrastructure, interest in renewable energy remains high, with at least two deals being negotiated, according to two investment bankers aware of the discussions.

US-based private equity firm KKR and Co. is evaluating the possibility of investing around $100 million in renewable power projects of Greenko Group, a UK-based group that has power projects in India, said the first investment banker quoted above. Both declined to be named.
A Greenko spokesperson and Sanjay Nayar, chief executive officer at KKR India, declined to comment.
Separately, the Asian Development Bank (ADB) is considering an investment in ReNew Wind Power Pvt. Ltd, an independent power producer, said the banker.

Sumant Sinha, chairman and chief executive officer of ReNew Wind Power, did not divulge details, saying he is unable to comment as his firm is talking to several investors. ADB did not reply to an email seeking comments.
In September 2011, ReNew Wind Power had secured an equity investment of up to Rs.1,000 crore from Goldman Sachs Group Inc.
At least half-a-dozen other international financial investors, including insurance companies, are scouting for asset-level deals, said the second investment banker cited earlier.

The deals will add to the rush of investments seen in this sector in the past couple of years.
The renewable power space saw 32 private equity (PE) and merger and acquisition (M&A) deals worth $1,288 million in 2013 against 14 deals worth $298 million in 2014 so far, according to VccEdge, a deal tracker.
In April, General Electric Co’s unit, GE Energy Financial Services, said it will invest $24 million in a solar power project in Madhya Pradesh by Welspun Renewables Energy Pvt. Ltd.

“One reason for higher investor interest in the renewable sector is ease of project implementation, as there are fewer developmental issues (like land acquisition) and the gestation period is small. Further, the exit via initial public offer markets seems like a reasonable option in this space, since very few Indian companies are listed in renewable energy sector,” the second investment banker said. “In fact, several players have already started preparing for their IPOs (initial public offerings) in 2015.”

Some listed firms in the unconventional energy space include Suzlon Group, Indowind Energy Ltd, SE Power Ltd and Orient Green Power Co. Ltd.
Apart from financial investors, international firms are also looking at strategic investments in India, while domestic companies are considering options like
mergers to achieve critical scale, said the second banker.

For instance, in December, French green energy company EDF Energies Nouvelles (EDF EN) and Luxembourg-based EREN acquired a 25% stake each in ACME Solar Energy Ltd, the solar energy arm of New Delhi-based ACME Cleantech Solutions, for Rs.550 crore.
In March, a consortium led by Abu Dhabi National Energy Co. PJSC agreed to buy two operational hydropower plants from debt-laden Jaypee Group for Rs.10,320 crore.

The Abu Dhabi firm, also known as Taqa, will buy a 51% stake in the 1,000 megawatts (MW) Karcham Wangtoo and 300MW Baspa II hydroelectric power plants in Himachal Pradesh.
Canada’s Public Sector Pension Investment Board will purchase a 39% stake, with IDFC Alternatives Ltd, the private equity arm of infrastructure finance company IDFC Ltd, buying the remaining 10%.

Moser Baer solar project had also received investments from Finnish government-owned Fortum, said the first banker.
However, international strategic investors are unlikely to acquire 100% stake in Indian portfolios as they are wary of the risks of land acquisition, permits and construction in India, said the first investment banker.
India’s national action plan on climate change recommends that the country generate 10% of its power from solar, wind, hydropower and other renewable sources by 2015, and 15% by 2020. India has an installed power generation capacity of 227,356.73 MW, of which 12.4%, or 28184.35 MW, is from renewable sources.

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