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ReNew Power Ventures Pvt. Ltd, a renewable energy producer, is in talks with Switzerland-based private equity (PE) firm Partners Group AG to raise $150-200 million. “The talks are at an advanced stage,” a person aware of the development said, requesting anonymity.
ReNew Power, in which Goldman Sachs Group Inc. has a majority stake, intends to use the money for generating 400 megawatts (MW) of solar power. Founded in 2011 by Sumant Sinha, ReNew Power has close to 600MW of installed and operational clean energy capacity across Maharashtra, Rajasthan, Karnataka, Gujarat, Madhya Pradesh and Haryana.
ReNew Power chairman and CEO Sinha declined to comment. A Partners Group spokesperson declined to comment. PE firms have shown increasing interest in green energy assets in India, where the government has set a target of generating 100,000MW of solar power, raising an earlier target five-fold, and 60,000MW of wind power by 2022 in a country that’s the world’s third largest emitter of greenhouse gases, behind only the US and China.
A subsidiary of Singapore-based Sembcorp Industries Ltd acquired a 60% stake in IDFC Alternatives-backed renewable energy firm Green Infra Ltd for S$227 million in February. In the same month, Actis Capital committed $230 million to create an Indian renewable energy platform called Ostro Energy Pvt. Ltd. In 2012, Morgan Stanley Infrastructure Partners invested $212.03 million in wind power firm Continuum Wind Energy Pte. Ltd.
Experts expect more deals in the space as the cost of renewable energy falls. Solar and wind energy are nearing grid parity—a point in time at which they will cost the same as power produced from traditional sources and available on the nation’s transmission and distribution grid.
At the same time, experts are wary about the weak finances of state electricity boards (SEBs) that purchase power from independent producers and distribute it to consumers.
“The aggressive aspiration laid out by the government, along with declining cost curves, has made India an attractive market for various players. I expect more deals to fructify in the future as solar generation inherently carries lower project execution and O&M (operations and maintenance) risks as compared to conventional power projects,” said Abhishek Poddar, a partner at consulting firm A.T. Kearney Ltd.
“Investors, however, need to be cautious about assumptions made on future performance efficiencies, including module degradation rates. Given the relatively less number of data points that we have on the same in the Indian context, aggressive assumptions can lead to inflated valuations. Similarly, one should also factor in the collection risks associated with weak financial health of the SEBs in India,” Poddar added.
SEBs are laden with a debt of Rs.3.04 trillion and accumulated losses of Rs.2.52 trillion. According to the government, the Indian clean energy market is largely driven by asset-based finance to the extent of 94% of the total investment in the sector. Renewable energy accounts for only 35,777MW of India’s total power generation capacity of 272,503MW.
Partners Group opened an India office in Mumbai last year, headed by Cyrus Driver. The group has around €42 billion of assets under management. According to its website, “Partners Group is an active investor in Indian private equity, real estate and infrastructure opportunities on behalf of its clients.”
Mint reported on 29 May about ReNew Power’s plans to raise around $150-200 million. The company plans to add a further 600-1,200MW in capacity. In July 2014, ReNew Power raised $140 million from three investors—Asian Development Bank, South Asia Clean Energy Fund India and Goldman Sachs.
Prior to that, in September 2011, ReNew Power raised Rs.1,000 crore from Goldman Sachs, which was the largest investment in India’s renewable energy sector at the time. Currently, ReNew Power has a portfolio of 14 operational wind power projects located in four states that are capable of generating close to 545MW. The company also has a pipeline of close to 250MW in solar power projects across India.
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