In a signal that investment interest in India’s energy sector that has shifted toward green energy projects like solar and wind, 12 private equity (PA) deals were struck last year for renewable projects worth $325mm versus none for conventional energy projects like coal and gas, according to Live Mint/The Wall Street Journal.
Yet PE energy transactions were down by more than half compared to 2011, when India’s power sector saw 27 valued at $1.19 billion. Just six were for conventional fuel-based projects, according to VCCEdge, an investment tracker.
The largest PE deal of 2012 was made by Morgan Stanley Infratructure Partners for $212.03 million and went to wind power firm Continuum Energy Pte Ltd. In another deal, Bharat Light and Power’s (BLP) acquired real estate developer DLF Ltd’s wind power assets.
Deal volume and value have also fallen to a three-year low, with PE firms making 268 transactions worth $7.59 billion, compared with 352 deals in 2011 worth $11.45 billion and 303 deals worth $9.19 billion in 2010.
Amol Kotwai associate director, energy and power systems practice for South Asia at consulting firm Frost and Sullivan remains upbeat about the renewable energy space. “It offers [a] tremendous amount of opportunity due to various factors—no dependency on fuel, regulations, reducing prices, besides the government mandate to ramp up renewable energy contribution to India’s overall energy basket,” Kotwal said.
India’s climate change recommendations include generating 10% of its power production from solar, wind, hydropower, and other renewable sources by 2015, and 15% by 2020. The country currently has an installed power generation capacity of 210,952 megawatts (MW), with 12.3% or 25,856MW of renewable energy capacity.
The muted interest in energy investment has been blamed on a lack of exit options, overall sluggish economic growth, fund raising challenges, and prolonged due diligence, says Live Mint/The Wall Street Journal. Getting new energy companies up and running, and providing services, can also take time and may account for the slow down in 2012 investment.
Some of the major players who are using 2010 and 2011 investments to build capacity include Kiran Energy Solar Power (KESP), incorporated in 2010. It has set up about 75 MW of capacity across Gujarat and Rajasthan, with plans to increase to MW by 2014, which would make it one of the largest solar power companies in the Asia-Pacific region. In 2010, three PE funds—New Silk Route, Bessemer and Argonaut—invested $45 million in the start-up; in 2011 the trio put in another $10 million, according to Eco-Business. There have been no reports of major 2012 investments in KESP.
PE giant Goldman Sachs committed $183 million to a little-known firm ReNew Power Ventures at the end of 2011, remarkable because ReNew had no capacity on the ground when the deal took place.
In September 2011, Bharat Light & Power obtained funding from Draper Fisher Jurvetson and VenturEast, to the tune of $10mm and a near 40 percent stake in the company.
Also in 2011, U.S.-based private equity firm FE Clean Energy Group Inc. bought a minority stake worth $40 million in Indian-based power producer NSL Renewable Power Pvt. Ltd., which will go towards wind, solar, and hydropower projects.
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To read the Eco-business article cited in this story, click here