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21
Aug 2018
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Business (The Total Investment & Insurance Solutions)
Small to mid-sized renewable
energy companies in India are starting to look like attractive takeover targets
as lenders and investors withhold funds, worried by the stiff competition, weak
bond markets, low tariffs and high debt besetting the sector. The
Total Investment & Insurance Solutions
The small companies’ difficulty in raising cash is keeping them away
from government power project auctions, restricting their growth and crippling
their ability to refinance loans, said a consultant from a top global
consultancy firm. The Total Investment
& Insurance Solutions
With many smaller operators being gobbled up or offering themselves for
sale, the number of projects being developed could fall, potentially keeping
India from its renewable energy targets, said the consultant, who did not wish
to be named as he is directly involved with a company that cancelled a bond
issue.
“India’s solar industry is becoming a big boys’ club,” said Rahul
Goswami, managing director of Greenstone Energy Advisors.
In a few years, there may be only a few big companies and a few regional
firms active in India’s renewable sector, he said.
The trend goes back at least to 2016, when Tata Power bought solar and
wind company Welspun Renewable Energy, but the pace is expected to pick up. The Total Investment & Insurance
Solutions
“Smaller players are being squeezed out ... due to two main factors:
cost of equipment and ... financing”, said Alok Verma, executive director at
Kotak Investment Banking, an arm of Kotak Mahindra Bank.
One of India’s largest renewables companies, Greenko Group, said in June
that it was buying 750 megawatts (MWs) of solar and wind assets from Orange
Renewables, because the Singapore-based company saw few opportunities for
growth. The deal has yet to be closed.
Essel Infra, with a renewable power capacity of 685 MWs, and Shapoorji
Pallonji Group’s 400-MW solar arm are also in talks to sell off their assets,
one firm and two banks doing the due diligence for these companies have said. The Total Investment & Insurance
Solutions
Besides loans, other funding options have also been dead ends for the smaller
companies, further limiting growth opportunities.
ACME Solar postponed an initial public offering (IPO) announced in
September last year as the proposed share issue did not generate enough
interest from investors, confirmed a banker who was directly involved in the
listing attempt.
Mytrah Energy, a major mid-sized renewables company, called off a $300
million to $500 million bond issue earlier this year as that option also went
dry for the sector, and it canned IPO plans as well, said a separate banker
directly involved there.
The companies have all declined to comment.
This dearth of financing and trend towards consolidation could be a
significant threat to India’s target of 175 gigawatts (GWs) of renewables
capacity by 2022, up from 71 GWs now, some analysts said. The Total Investment & Insurance
Solutions
Others said a concentration of bigger players, with more cash and better
financing, could mean things move faster.
“Consolidation in the renewable energy industry augurs well for the
overall success of the programme ... Large players have access to required
capital at reasonable rates and can procure the latest technology,” said
Debasish Mishra, head of Energy, Resources and Industrials at Deloitte Touche
Tohmatsu India.
Tata Power, one of India’s largest power generators, said in May it plans
to invest $5 billion to increase its renewable capacity in India fourfold over
the next decade to 12 GWs.
More than doubling India’s renewables capacity by 2022
will require $76 billion, including debt of $53 billion, the Ministry of New
and Renewable Energy said in July.The Total Investment & Insurance
Solutions
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