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Global capital heads for renewable energy firms

According to reports, India’s renewable energy companies are attracting capital from global funds even as many conventional power plants languish without adequate coal and gas. The Asian Development Bank (ADB), which is buying a 25% stake in Welspun Renewables Energy Pvt. Ltd (WREPL) for $50 million, has already brought in part of the funds. Usually, the ADB invests in specific projects, not entire companies.

“With this investment, the renewable energy sector has got a much-needed shot in the arm; it shows the promise that this sector can realize and ADB’s investment is a testimony to that,” said Vineet Mittal, vice-chairman, WREPL. In April, GE Energy Financial Services, a unit of General Electric Co. (GE) had invested $24 million in a Welspun solar power project in Madhya Pradesh.

Ernst & Young (EY) had advised Welspun on both GE and ADB deals. ADB is considering another investment in ReNew Wind Power Pvt. Ltd, an independent power producer. Sumant Sinha, chairman and chief executive officer of ReNew Wind Power, said his company was speaking to several investors, but did not share details. In September 2011, Goldman Sachs Group Inc. had invested Rs.1,000 crore in ReNew Wind Power. Two more investments in renewable energy firms were being negotiated, Mint had reported on 13 May, citing two investment bankers aware of the discussions.

At least six more international investors, including insurance companies, were scouting for deals at the project level, the bankers had said. A net energy buyer, India has an annual energy import bill of around $150 billion. By 2030, this is expected to reach $300 billion by 2030. Developing renewable energy will also help reduce dependence on coal, which is in short supply domestically, requiring imports to fuel most of India’s power plants. India is also exploring options to make it compulsory for conventional power project developers to build renewable capacity at the same location, a move that can provide an impetus to eco-friendly electricity. The need to integrate conventional and renewable power generation is also being increasingly recognized. The renewable electricity space witnessed 32 private equity (PE) and merger and acquisition (M&A) deals worth $129 billion in 2013 against 14 deals worth $298 million in 2014, according to VccEdge, a deal tracking firm. On 16 June, Mint had reported on plans to form two state-owned joint ventures (JVs) which will oversee the construction of renewable energy projects, contributing to India’s energy security and reducing its reliance on conventional sources of fuel such as coal.

The oil and renewable energy ministries are working on the proposal, which sees them setting up a JV to oversee large-scale, grid-integrated projects and the other for off-grid projects, according to documents reviewed by Mint. These new public sector units will, in turn, be JVs between state-owned oil sector firms such as Indian Oil Corp. Ltd (IOCL), Bharat Petroleum Corp. Ltd, Hindustan Petroleum Corp. Ltd, Oil and Natural Gas Corp. Ltd (ONGC), Oil India Ltd and Solar Energy Corp. of India and the Indian Renewable Energy Development Agency. While one of the JVs will be led by ONGC, IOC will lead the other.

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