Bridge India

Raising capital number one priority for Indian solar developers

As the Indian solar sector grows in size and prominence, equity raising and portfolio sales are also gathering pace. Three major deals were announced last week – Azure Power is selling a minority stake to Canadian asset manager Brookfield to raise USD 75 million (refer),  Acme Solar is raising USD 120 million though the mezzanine route from Piramal Enterprises’ Structured Investment Group (refer) and SunEdison has finally agreed to sell its commissioned and pipeline capacity of 1,300 MW to Greenko (refer). While Azure Power has a commissioned plus pipeline capacity of over 1,000 MW, Acme Solar’s commissioned plus pipeline capacity stands at over 1,800 MW. With developer portfolios growing at a rapid pace over the past few quarters – 6 Indian developers have now got total commissioned plus pipeline capacity of over 1,000 MW – raising capital has become urgent priority for the sector.

  • Access to capital including scale and cost of capital is the most important strength and differentiating factor for project developers
  • In the face of falling bid tariffs, portfolio and minority stake sales instill much needed confidence in the market and help kick-start a secondary market for solar transactions
  • Debt capital market transactions by Greenko and Tata Power show new financing avenues and signal maturing of the sector

Just last month, Welspun announced that it is selling its 1.1 GW renewable portfolio to Tata Power in a deal valued at USD 1.4 billion (refer) allowing the company to unlock capital for building new projects. In March this year, Piramal Enterprises along with Netherland’s APG Asset Management had committed to invest USD 132 million in Essel Green Energy (refer) to help them complete their projects.

Over the past few months, since SunEdison’s US bankruptcy and aborted solar IPOs, there has been mounting concern about availability of capital for the sector. Falling bid tariffs further served to make things more difficult for Indian developers. India does not have the kind of domestic patient capital – typically utilities and pension funds/ insurance companies looking for long-term predictable cash flows – needed for buyout of such assets. The sale of equity stakes by Azure Power and Acme Solar in such an environment is very reassuring for the entire sector. Furthermore, Tata Power and Greenko have managed to raise USD 525 million (refer) and USD 500 m (refer) respectively in landmark debt capital market transactions at very attractive terms in local and offshore markets respectively. These transactions show fast maturing of the sector and widening of interest from the international community.

BRIDGE TO INDIA views these market developments very positively but still believes that tariff and return expectations need to improve to more reasonable levels to provide appropriate risk adjusted returns to investors.