Until two years ago, renewable energy players were struggling to develop a sizeable wind and solar power portfolio in order to be able to access the capital markets. Today, the situation is such that a large number of solar and wind IPPs boast of project portfolios of over 1 GW each. These include companies such as Adani Power, Acme, ReNew Power, Greenko, Mytrah Energy, Tata Power Renewable Energy and Azure Power.
The solar power segment witnessed significant allocations over the past two years and the wind power segment is beginning on its journey of competitive bidding-based allocations. Once the teething issues in the transition from a feed-in tariff (FiT) regime to an auctionbased mechanism are resolved, the wind power space is likely to see a spate of tenders across states.
Therefore, having achieved considerable scale and foreseeing a significant opportunity for project development, a large number of developers are set to raise capital to sustain business growth.
Acme Solar and Sembcorp have announced plans to access the capital markets for raising equity. Acme has filed preliminary papers for a Rs 22 billion initial public offering with the Securities and Exchange Board of India. Sembcorp has stated that it may list its Indian unit either in India or elsewhere. ReNew Power is also keen to launch an IPO sometime in the coming year.
But these players should be cautious about the fact that investors, financial or strategic, are aware of the key risks facing the sector – a dwindling project pipeline, falling tariffs (for all the wrong reasons), poor discom credit and credibility as indicated in some state utilities’ intention to renegotiate old PPAs, uncertainty about grid availability, poor plant performance, etc. The performance of Indian renewable companies listed abroad such as Mytrah Energy and Azure Power is also not exemplary.
Against this backdrop, there is an urgent need for policymakers to improve sector fundamentals and for the industry to avoid indulging in price wars.