India has set a target of deploying 500 GW of non-fossil fuel-based energy by 2030. According to the 21st report of the Standing Committee on Energy (2021-2022), India requires an additional investment of about Rs 17 trillion, including associated transmission costs, to meet its long-term energy commitments. At present, there is a huge gap between the required investment vis-à-vis the actual investment per annum.
Globally, the Indian renewable energy market is poised to be one of the most attractive markets for investment. During 2021-22, investments in the renewable energy sector witnessed an increase of 125 per cent over those in the previous financial year, given the country’s transparent competitive bidding framework, bankable power purchase agreements and policy and regulatory environment according to the Institute for Energy Economics and Financial Analysis.
Over the past 12 months, the sector has increasingly attracted investments in the form of equity, debt, mergers and acquisitions, and issuance of bonds. Renewable Watch highlights major debt and equity deals and other key developments in the industry over this period…
- In December 2021, the Virescent Renewable Energy Trust (VRET), a platform established by global investment firm KKR to purchase renewable energy assets in India, acquired a 49 MW solar portfolio from five special purpose vehicles (SPVs) of Focal Energy for Rs 3.54 billion. Globus Steel and Power, Focal Energy Solar One India, Focal Energy Solar India and SunBorne Energy Rajasthan Solar will all be 100 per cent owned by Virescent. In addition, Virescent acquired 66 per cent stake in Focal Energy Solar Three India through indirect acquisition method.
- In January 2022, ReNew Power sold 138 MWp of its distributed rooftop solar portfolio to Fourth Partner Energy for Rs 6.72 billion, given ReNew’s increasing focus on utility-scale projects. Reliance New Energy Solar Limited (RNESL), a wholly-owned subsidiary of Reliance Industries Limited (RIL), also entered into a definitive agreement to acquire Faradion Limited’s entire shareholding for £100 million. RNESL will deploy Faradion’s sodium-ion technology for its projected fully integrated energy storage gigafactory in Jamnagar.
- In February 2022, NTPC Vidyut Vyapar Nigam, a wholly-owned subsidiary of NTPC Limited, acquired a 5 per cent stake in Power Exchange of India Limited. Godawari Green Energy Limited (GGEL) also signed a share purchase agreement worth Rs 6.65 billion with VRET for the sale of its 50 MW solar thermal power facility.
- In the same month, pharmaceutical company Cipla signed an agreement to acquire nearly 32.49 per cent of AMP Energy Green Eleven with an aim to establish a solar power facility in Maharashtra. Moreover, Torrent Power Limited entered into a share purchase agreement with Blue Diamond Properties and Balrampur Chini Mills to acquire 100 per cent of the equity share capital of Visual Percept Solar Projects, an SPV, with an estimated purchase price of Rs 1.63 billion.
- In March 2022, Bharti Airtel acquired a 9 per cent stake in Avaada Clean TN Project, an SPV founded for the purpose of owning and operating captive power plants, for about Rs 78.8 million in an all-cash deal. In other developments, Waaree Energies also received approval from the National Company Law Tribunal to acquire domestic solar manufacturer Indosolar Limited, while Torrent Power completed the acquisition of a 50 MW solar project in Maharashtra owned by the UK-based developer Lightsource BP, at an enterprise value of about Rs 3 billion.
- In April 2022, Mitsui & Co Limited acquired a 49 per cent stake in ReNew Power’s 400 MW round-the-clock renewable energy project. The financial details of the acquisition were not disclosed.
- During the same period, Tata Power entered into a contractual agreement with a consortium led by BlackRock Real Assets, which includes Mubadala Investment Company, to invest in Tata Power Renewable Energy Limited (TPREL), a subsidiary of Tata Power. BlackRock Real Assets and Mubadala invested Rs 40 billion for a 10.53 per cent stake in TPREL in the form of equity/compulsorily convertible instruments, corresponding to a base equity valuation of Rs 340 billion.
- In another significant deal, in May 2022, Shell Overseas Investment B.V., a wholly-owned subsidiary of Shell plc, acquired 100 per cent stake in Solenergi Power Private Limited and the Sprng Energy group of companies from Actis Solenergi Limited at $1.55 billion.
- In June 2022, Biocon Limited announced its plan to acquire a 26 per cent share in AMPYR Renewable Energy Resources Eleven Private Limited (AREREPL) for Rs 75 million. Further, Tech Mahindra, agreed to purchase a 26 per cent share in Huoban Energy 6, a wholly owned subsidiary of Fourth Partner Energy, for Rs 16 million.
- GE Energy Financial Services acquired a 49 per cent stake in Continuum’s 148.5 MW Morjar onshore wind project in Gujarat in June.
- In July 2022, Mahindra CIE Automotive purchased a 26 per cent share in Strongsun Solar to obtain power from two captive solar power plants. The acquisition was roughly valued at Rs 33.5 million. Further, Hindalco Industries acquired a 26 per cent share in Cleanwin Energy SIX’s 5 MW captive open access wind project at a cost of Rs 7.15 million.
- In the same month, Syngene International agreed to buy a 26 per cent share in AREREPL to purchase power from a 50 MW open access solar project in Koppal district, Karnataka.
- In August 2022, Torrent Power announced the acquisition of a 100 per cent stake in Wind Two Renergy Private Limited from Inox Green Energy Services for Rs 325.1 million.
- Among the biggest deals of the year, the JSW Group signed an agreement in August 2022 to acquire renewable energy company Mytrah Energy India in a deal estimated at $1.8 billion-$2 billion.
- In September 2022, Ontario Teachers purchased a 30 per cent equity stake in Mahindra Susten for Rs 23.71 billion. RIL also signed definitive agreements to obtain a significant stake in SenseHawk for a total transaction value of $32 million.
- In other developments in September 2022, Hindustan Zinc also acquired a 26 per cent stake in Serentica Renewables India, an SPV for Rs 3.5 billion.
- Kohlberg Kravis Roberts and the Hero Group also signed definitive agreements to invest $450 million in Hero Future Energies in September 2022.
- In November 2022, KKR signed agreements to invest $400 million in decarbonisation platform Serentica Renewables.
- December 2021 saw several debt deals. The US International Development Finance Corporation approved up to $500 million in debt financing for First Solar to drive the company’s ventures in India including a vertically integrated solar PV module manufacturing facility in Tamil Nadu. Further, RIL secured a $736 million green loan to fund its largest foreign acquisition, REC Solar Holdings in Norway.
- In the same month, CleanMax received $34 million in funding from the Danish Investment Fund for Developing Countries. Furthermore, Rural Electrification Corporation Limited signed an agreement with KfW Development Bank for availing an official development assistance term loan of $169.5 million under the Indo-German Bilateral Partnership.
- In February 2022, SunSource Energy entered into a project financing agreement with SunFunder, an international solar finance company, to enable its growth in Southeast Asia.
- In March 2022, the International Finance Corporation announced the financing of a 600 MW solar power park expected to come up in Uttar Pradesh. TUSCO, a joint venture between THDC India and the Uttar Pradesh New and Renewable Energy Development Agency, will be in charge of infrastructure development. The company will receive up to $26,800 per MW in funding.
- During the same month, Adani Green Energy Limited raised a $288 million facility for its under-construction renewable asset portfolio through definitive agreements signed with a group of leading international lenders including BNP Paribas, Coöperatieve Rabobank U.A., Intesa Sanpaolo S.p.A., MUFG Bank Limited, Societe Generale, Standard Chartered Bank and Sumitomo Mitsui Banking Corporation.
- In May 2022, IREDA disbursed Rs 100.18 billion in loans for renewable energy projects across Maharashtra.
- In July 2022, Continuum Green Energy secured $350 million from two institutional investors for funding the growth of its clean energy projects.
- In August 2022, Greenko secured a Rs 55 billion loan from the Power Finance Corporation, to construct a river energy storage project in Andhra Pradesh. In the same period, ReNew Power entered into an external commercial borrowing project finance loan agreement worth $1 billion with 12 international lenders led by Rabobank.
- In October 2022, Orb Energy, a vertically integrated provider of solar energy solutions in India, announced that it has received a $20 million follow-on loan from the US International Development Finance Corporation to support its in-house financing facility for rooftop- and ground-mounted solar customers in India.
Green bonds are increasingly being used as a source of finance by many leading Indian renewable energy developers. This year 2021 saw the highest capital raised by renewable companies using green bonds. In 2022 as well many developers raised capital in the international as well as domestic markets through green bonds.
In January 2022, India Clean Energy Holdings, a wholly-owned subsidiary of ReNew Energy Global, raised $400 million by issuing senior secured dollar notes at a rate of 4.5 per cent. The funds will be utilised by the company’s subsidiary to restructure the current high-cost debt and fund capital expenditure in renewable energy assets, among other things. In February 2022, VRET raised Rs 6.5 billion through a domestic bond issuance that included tranches of 7.33 years (Rs 1.5 billion) and 10 years (Rs 5 billion). Following this, Avaada Energy, in March 2022, announced that it will raise Rs 14.4 billion in green bonds in the Indian capital market at a rate of 6.75 per cent, making it the country’s largest AAA-rated green bond by any renewable energy developer. Meanwhile, in April 2022, Greenko Wind raised $750 million for an energy storage plant in Andhra Pradesh through a global bond offering. Following the start of roadshows, the company was able to secure a pricing of 5.5 per cent for its green bond offering.
Other key developments
Several commitments were made by manufacturers, developers and financiers of renewable energy to drive growth in the sector. In January 2022, EverSource Capital announced the close of the Green Growth Equity Fund, reportedly India’s largest climate impact fund, at $741 milli-on. The Indian Railway Finance Corporation, the financial arm of Indian Railways, also issued $500 million of denominated, senior and unsecured green notes. The green notes will be issued with a 10-year maturity and a coupon rate of 3.57 per cent.
In June 2022, the Hinduja Group, accompanied by Caterpillar Venture Capital, Mercuria, Our Crowd and Volvo Energy, invested $18.45 million in Connected Energy, a second-life battery energy storage company. Further, META4, located in the UAE, announced that it will invest Rs 2.5 billion. JSW Steel allocated Rs 100 billion for targeted investments to reduce the company’s carbon footprint. The company plans to gradually replace its thermal power use with renewables. HSBC also committed Rs 1.25 billion for green initiatives and energy transition projects in India for a period of five years. Meanwhile, Tata Power signed an MoU with the Tamil Nadu government to invest roughly Rs 30 billion for developing a 4 GW solar cell and solar module manufacturing unit in the state.
More recently, the Adani Group committed an investment of $100 billion over the next decade, primarily in the new energy and digital space including data centres. Waaree Energies Limited also recently raised Rs 10 billion in primary funding from various investors.
The recent macroeconomic fluctuations have encouraged many players to raise capital through an initial public offering (IPO). In June 2022, Waaree Energies received approval from the Securities and Exchange Board of India (SEBI) to launch its IPO. Around the same time, Inox Green Energy Services filed new preliminary papers with SEBI to raise Rs 7.4 billion through an IPO. The IPO subscription is expected to open in November 2022. In August 2022, Vikram Solar received approval from SEBI to raise funds through an IPO. The IPO will comprise a fresh issue of up to Rs 15 billion. Suzlon Energy Limited also announced the opening of its Rs 12 billion rights issue on October 11, 2022.
Challenges and outlook
To meet India’s clean energy commitment, it is imperative to increase the inflow of domestic and global capital in the renewables sector over the decade. However, there are many impediments to financing in the clean energy sector. The renegotiation of power purchase agreement (PPA) tariffs discovered through competitive biddings and delay in the adoption of PPA tariffs are prominent barriers. Moreover, the financial state of several state discoms is not steady. Many discoms continue to face delays in the payment of energy bills. Land acquisition and clearance constraints are also key concerns for potential and current investors.
Going forward, the inflow of finance in the renewables sector will be dependent on how effectively these constraints are minimised. Innovative and new financing mechanisms such as green bonds and investment funds may also be explored further. Greater investments are expected to be directed towards emerging segments such as green hydrogen, hybrid projects, offshore wind and battery storage.
By Kasvi Singh