Encouraged by the government’s focus on renewable energy, companies in the sector are starting to raise funds in preparation for new business opportunities.
ReNew Power Ventures Pvt. Ltd is one such company and has started initial discussions to raise about $150-200 million in private equity (PE) funding, according to two people familiar with the discussions. ReNew Power intends to use the funds for generating another 400 megawatts (MW) of solar power.
Founded in 2011 by Sumant Sinha, former CEO at Suzlon Energy Ltd, ReNew Power has close to 600MW of installed and operational clean energy capacity across the states of Maharashtra, Rajasthan, Karnataka, Gujarat, Madhya Pradesh and Haryana. The company plans to add a further 600-1,200MW in capacity.
“ReNew Power has sufficient funds to meet the next level of expansion. But it plans to monetize the current boom in clean energy space and expand further,” the first person cited above said. Names of the PE funds which are in talks with ReNew Power could not be ascertained.
Sinha, chairman and chief executive officer of the firm, declined to comment on the fundraising plans.
As part of its push for clean energy, the government emphasized the need to achieve the 175,000MW target set for clean energy installations by 2022.
According to this year’s budget, this would include 100,000MW of solar power, 60,000MW of wind power, 10,000MW of energy from biomass and 5,000MW from small hydroelectric projects. India’s clean energy capacity is currently 33,000MW.
ReNew Power will be raising funds within a year of the last round of funding. In July 2014, it raised $140 million from three investors—Asian Development Bank, South Asia Clean Energy Fund India and Goldman Sachs. Prior to that, in September 2011, ReNew Power raised `1,000 crore from Goldman Sachs, which was the largest investment in India’s renewable energy generation sector at the time.
A Goldman Sachs spokesperson declined to comment on any follow-on investment plans. The additional investment will give the company firepower to expand its portfolio.
“As per industry estimates, production of 1MW of solar power costs about `3-3.5 crore ($0.5 million). By raising $150-200 million, ReNew Power can generate anywhere between 300MW to 400MW,” said the second person quoted above.
At present, ReNew Power has a portfolio of 14 operational wind power projects located in four states that are capable of generating close to 545MW. The company also has a pipeline of close to 250MW in solar power projects across India.
As part of its plans to strengthen its solar power division, ReNew Power appointed Ajay K. Goel, former chief executive officer at Tata Power Solar, as president of its solar and new businesses division last week.
“Government policy has been exceptionally stable over the years, and reducing costs due to technology improvements make renewables a good investment,” said Kameswara Rao, leader, energy, utilities and mining at PricewaterhouseCoopers Pvt Ltd.
“The rising share of renewables is also bringing new challenges of integration, which should be addressed to maintain investment flow,” he added.
Source: Mint; 29 May 2015