By Preeti Wadhwa
The Indian renewable energy sector has been witnessing increasing consolidation, a testament to its growing maturity. Energy majors with substantial financial resources are looking to expand their portfolios rapidly, adopting both organic and inorganic growth strategies. This has enabled sellers to secure favourable valuations for their assets upon exit. In line with this trend, significant merger and acquisition (M&A) activity was witnessed in the past year. On December 27, 2024, JSW Neo Energy Limited, a wholly owned subsidiary of JSW Energy, signed an agreement to acquire a 4,696 MW platform from O2 Power Pooling Pte Limited (O2 Power), jointly owned by EQT Infrastructure and Temasek. The platform’s enterprise valuation, after adjustments for net current assets, is approximately Rs 124.68 billion. The acquisition, which includes O2 Power Midco Holdings and O2 Energy SG, is subject to approval from the Competition Commission of India and other customary regulatory clearances. The deal led to increased market confidence, with JSW Energy’s share price opening at Rs 650.20, a 5 per cent increase from its previous close of Rs 625.05, and rising to the day’s high of Rs 673.05.
Established in 2020, O2 Power has a total portfolio of 4,696 MW. Of this, 2,259 MW is expected to be operational by June 2025, 1,463 MW is currently under construction and 974 MW is in the pipeline, scheduled for commissioning by June 2027. The platform has a blended average tariff of Rs 3.37 per kWh with an estimated remaining lifespan of approximately 23 years.
JSW Energy Limited has a diverse presence spanning power generation, transmission, manufacturing, renewables and trading. Currently, the company operates approximately 7.7 GW of capacity, which includes thermal, solar, wind and hydropower plants across 11 states. JSW Energy is working on forward integration by establishing 40 GWh of energy storage capacity by 2030, comprising both battery energy storage systems and pumped storage projects.
Committed to achieving carbon neutrality by 2050, JSW Energy is building an integrated power generation portfolio to achieve its 20 GW target by 2030. The acquisition of O2 Power is a step in this direction, increasing JSW Energy’s current and planned generation capacity by 23 per cent, from 20 GW to 24.7 GW. JSW now has a large pipeline of utility-scale projects across seven states. The projects have long-term power purchase agreements (PPAs) with quality offtakers ensuring secure revenues. O2 Power’s diversified portfolio also included 596 MW of commercial and industrial (C&I) capacity, which has increased JSW Energy’s total C&I capacity to 3,694 MW, strengthening its position in the corporate renewable energy procurement market. This deal with O2 Power also surpasses JSW’s acquisition of Mytrah Energy’s 1,753 MW renewable energy portfolio in March 2023, both in terms of capacity and asset valuation.
The road ahead
The Indian renewable energy sector is attracting long-term investors, including private equity and venture capital firms. According to Renewable Watch Research, M&A activity, including asset sales, amounted to over Rs 200 billion between November 2023 and November 2024. These deals included sale of specific projects or entire companies from both domestic and global companies.
Despite the increasing M&A activity in the renewables market, several challenges persist for Indian companies. These include high borrowing costs, limited working capital and cash flow constraints due to payment delays. Currency volatility also poses a significant risk. “The biggest financing challenge for India’s cleantech sector is the devaluation of the Indian rupee against the US dollar, which means foreign investors have to contend with rupee-denominated SECI PPAs. The growing depth of the Indian domestic banking sector and high debt-to-asset ratios allowed in the infrastructure sector significantly alleviate this currency risk for foreign investors. I believe that the Indian government should stick to its guns and continue issuing Indian rupee-denominated PPAs. Let foreign equity investors manage this currency risk,” says Tim Buckley, director, Climate Energy Finance.
Despite these challenges, India’s renewable energy sector is poised for significant growth, with a year-on-year increase of 25-40 per cent in renewable energy installations projected in 2025, according to Buckley. Further, a robust pipeline of government-backed projects, ambitious renewable energy targets, declining project costs and technological innovations are driving this growth. With these developments, increased private capital is expected to flow into India’s booming cleantech sector.
The recent acquisition of O2 Power is just one example of the many M&A activities anticipated, as investors in clean energy start-ups seek successful and timely exits.
