Foreign cos stay off clean energy M&As
MUMBAI: Foreign strategic investors have largely stayed away from the flurry of dealmaking in India’s renewable energy sector, preferring instead to build from the ground up.
Out of the $2.32 billion worth of mergers and acquisitions (M&As) in India’s renewable energy sector in the last 15 months, foreign companies have bought assets worth just $290.6 million, while Indian companies have acquired $2.03 billion worth of assets, according to data from Thomson Reuters.
Among the larger deals in this period are Tata Power Co Ltd’s acquisition of 1.1 GW assets from the Welspun Group, Greenko Group’s’ acquisition of SunEdison’s India portfolio, and the merger of Orient Green Power Co Ltd and IL&FS Wind Energy.
Preference for greenfield projects and troubled balance sheets in their home markets are seen as two reasons why foreign investors have not been active in the M&A market for renewable energy.
“With many of the foreign strategics, there has been a much larger preference for organic build-out for their businesses, because they believe that they have much better control over the assets, both from an operational perspective and from an implementation perspective,” said Kaustubh Kulkarni, managing director and head of investment banking at JP Morgan India Pvt. Ltd.
Strategic investors also feel that given the renewable targets in the country, there was good visibility of new projects of meaningful size to be awarded for a sustained period of time, and given that they have built teams and capabilities to develop these projects, there was a tendency to prefer participating in bids and winning projects on their own rather than going after somebody else’s portfolio, Kulkarni added.
In India, the opportunity to scale up is significant, with the government targeting to achieve 175GW of renewable energy generation by 2022.