The Indian renewable energy sector has entered the year 2019 with strong tailwinds as far as M&A and financing activities are concerned. A large number of acquisitions have been concluded or announced since January 2019. There is a buzz in the capital markets as well with a slew of renewable initial public offererings (IPOs) and green bond
issues being announced of late.
The year began with Reliance Industrial Investments and Holdings Limited signing an agreement to acquire 88 per cent stake in Kanoda Energy Systems Private Limited, which has a presence in the specialised fields of solar advisory, product design and technology validation. Following that, Canadian renewable energy developer AMP Solar completed the acquisition of a Suzlon SPV, Rudra Solar Farms. In addition, Suzlon Energy sold its majority stakes in SE Solar and Gale Solarfarms to CLP Wind
Farms. Adani Green Energy Limited also completed its acquisition of a 20 MW solar power project located in Bagewadi from FS India Devco Private Limited. In the latest deal, Petroliam Nasional Berhad (Petronas) has reportedly finalised a deal with I Squared Capital to acquire a majority stake in solar rooftop developer Amplus Energy Solutions Private Limited.
Simultaneously, investor appetite among the private equity community is evident from the strong rounds of funding as well as fund-raising. In February 2019, EverSource Capital acquired a minority stake in Ayana Renewable. EverSource Capital had launched the Green Growth Equity Fund, with a fund-raising target of £500 million. In March, Actis PE-backed Sprng Energy also acquired 194 MW of solar assets from Shapoorji Pallonji.
As it appears, the consolidation wave is being driven by well-funded companies and funds, both global and domestic, which are aggressively adding well-performing assets to their portfolios, in order to increase operational efficiencies through economies of scale. On the selling side, the market is largely led by small to mid-sized renewable energy companies, which are worried by the stiff competition, weak bond market, low tariffs and high debt in the sector. In addition, there are large and diversified business groups that are looking to deleverage their balance sheets by encashing their solar assets.
On the markets side, a number of IPOs and bond issues have been announced by various players, including Hero Future Energies, Azure Power ReNew Power, the Gensol Group, and Sterling and Wilson.
While the year has started on a strong note in terms of financings and deal activity, there are several factors that may pose a challenge in the latter part of 2019. For one, there is political uncertainty in the wake of the general elections. The solar power segment is also impacted by the global environment, specifically the continuance of the trade wars, which could potentially keep global investors away from emerging markets in general. Finally, issues pertaining to land and transmission constraints, if not
resolved in a timely manner, may impact IPO and bond subscriptions.