According to reports, the renewable energy sector in India, led by the wind energy segment, is seeing a rebound in investment with around five deals worth $500 million (approximately Rs3,000 crore) being sealed in 2013. In contrast, there has not been a single deal in the conventional energy segment.
“Investors are shying away from conventional energy due to policy uncertainties and lack of fuel linkage. While the government has been flat-footed on thermal energy, it is encouraging renewable energy, making the sector attractive for investors,” said Vish Narain, partner at global private investment firm TPG.
In March, an affiliate of the Government of Singapore Investment Corporation (GIC) sealed a pact to invest $150 million in Greenko. The deal, the only $100-million-plus deal so far in the year, will enable Greenko to expedite its wind power projects.
India plans to double its renewable energy capacity to 55,000 MW by 2017 to reduce its dependence on fossil fuel. In the past few years, the wind energy sector has prospered even as other sectors have missed targets due to sops such as generation-based incentives (GBI) and accelerated depreciation (AD). The government rolled back both incentives in April 2012 only to reintroduce GBI, which gives independent power producers monetary benefit on every unit generated in April 2013.
“Wind energy has been established in India and is now entering a phase of consolidation. Serious players who are in the sector for pure play generation would increasingly look at mergers and acquisition opportunities as non-serious players who entered the sector for tax breaks look for an exit,” said Hemal Zobalia, partner, KPMG India.
Real estate major DLF, as part of its strategy to exit non-core businesses, sold three of its wind farms for Rs500 crore to Bharat Light and Power, Tulip Renewable Powertech, and Violet Green Power respectively. Debt-laden Lanco Infratech is also in talks to exit its wind energy business.
Not just investment activity, M&A activity is also quite robust as Mercom Capital Group said in a recent release: “Wind sector had a strong 2012 globally with about 45 GW in installations during an uncertain year on the policy front. In India, funding and M&A activity in the wind energy sector in the first quarter of 2013 was active with transactions in project, debt and other funding as well as project merger and acquisition.”
India has an ambitious target of acquiring 15% of power needs, or 80,000 MW, from renewable sources by 2020. Wind energy is pegged as a key growth driver with the sector targeting 15,000 MW of new capacity in the next five years. India has a total installed renewable energy capacity of 26,000 MW, which comprises mainly wind power of 18,275 MW.