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Ajay Piramal-controlled Piramal Enterprises Ltd is set to make its second investment in the renewable energy sector this year with an investment of Rs.800 crore (approximately $120 million) in solar power producer ACME Solar, according to two people aware of the development.
The investment in Delhi-based ACME is being done by Piramal Enterprises’ Structured Investment Group (SIG), which provides structured mezzanine funding to companies in various sectors, especially in infrastructure.
“Piramal SIG had been evaluating the business for a while now and the transaction is almost finalized. Within infrastructure, the core area of interest for SIG unit, renewable energy, is where they are extremely keen on investing right now,” said one of the two people cited above, requesting anonymity, as the talks are private.
In March, Mint reported that Piramal Enterprises Ltd and Dutch pension fund asset manager APG Asset Management were jointly investing $132 million (Rs.900 crore) in Essel Infrastructure Ltd’s solar platform across India.
The solar platform, Essel Green Energy Pvt. Ltd, owns 160 megawatts (MW) of solar assets in four Indian states, of which 110MW is operational and 50MW is under construction. The company plans to raise capacity to 1,000MW over the next two to three years.
Other investments by Piramal’s SIG division include Rs.615.5 crore in two cement firms and buying non-convertible debentures (NCDs) of Sanghi Industries Ltd, the flagship company of the Ravi Sanghi Group, worth Rs.265.50 crore, Mint reported on 21 April.
The division has also invested Rs.350 crore in NCL Industries Ltd, the owner of the Nagarjuna Cement brand; Rs.500 crore in Green Infra, an alternative energy company; and Rs.425 crore in Navayuga Roads, according to the company’s website.
In 2014, Piramal Enterprises and APG Asset Management, the Netherlands’ largest pension fund, said they would invest $1 billion in India’s high-growth infrastructure sector over the next three to four years.
The funding from Piramal will help ACME complete solar power projects that are under development across India.
“The company has an operational portfolio of over 400MW of solar power asset and it has a strong pipeline of around almost a gigawatt (GW) of assets under various stages of development, which needs to be funded,” said the second of the two people cited earlier.
According to the company’s website, the total capacity of ACME’s portfolio stood at 1,519MW, which includes 490MW in Telangana, 310MW in Andhra Pradesh, 104MW in Punjab, 100MW in Rajasthan and other projects in Gujarat, Madhya Pradesh, Odisha, Bihar, Uttar Pradesh and Chhattisgarh.
ACME aims to commission 960MW of projects by March 2017 and increase its portfolio to 7.5GW by 2019.
The funding will also help support the energy company at a time when its foreign partners are looking at exiting their joint venture with ACME, according to the second person cited earlier.
In June, The Economic Times reported that French firm EDF Energies Nouvelles and Luxembourg-based EREN Renewable Energy may exit ACME Solar. EDF and EREN hold a 25% stake each in the firm, with ACME promoters holding the rest.
ACME Solar is also looking at other options, such as asset sales, to raise funds for completing its pipeline of projects.
In June, Mint reported that ACME Solar is in talks to sell about 275MW of its operational solar assets to an infrastructure fund of asset manager IDFC Alternatives.
In an emailed response, Piramal Enterprises said the company evaluates various investment opportunities as part of its business without giving details.
“This evaluation of opportunities includes various criteria, including technical, financial, taxation, commercial, regulatory and legal. Once these criteria are met, it is followed by internal approvals at various levels, post which comes a comprehensive financial and legal diligence. Investments are made only in those projects that come out of this filtration process and have been approved by the Board or its duly empowered Committee. Any disclosure prior to this would only be speculative,” the company said.
Emails sent on Friday to Manoj Upadhyay, founder and chairman of ACME Solar, did not elicit any response.
Piramal’s plans to invest in ACME come on the heels of investments worth almost $1.55 billion in the Indian renewable energy sector in 2015, according to data from VCCEdge, the financial research platform of the VCCircle Network.
The investor interest is being driven by Prime Minister Narendra Modi’s aggressive push for renewable power to fight climate change, setting an ambitious target of increasing India’s clean energy capacity more than fivefold to 175GW by 2022. Of this, around 100GW is to come from solar power.
According to industry experts, investors are being attracted by the scale of the Indian renewable power opportunity.
“India is poised to be one of the top three renewable energy markets in the next 5-10 years. Right now, it is one of the fastest growing markets and that is attracting a lot of investors,” said Manish Begrajka, executive director at advisory firm Euromax Capital.
However, not everyone believes that the ambitious targets set by the government can be achieved.
In a July 2015 report, Deutsche Bank forecast India’s solar capacity would reach only 34GW by the year 2020. “Realistically, challenges of weak financials of distribution companies and grid constraints need to be addressed. Hence, our forecasts consider 34GW solar power capacities in India by 2020,” the report said.
The intent is in place, but a comprehensive strategy is still needed to achieve the large number in order to avoid an IPP-type (independent power producers) failure wherein others in the value chain (coal, railways and distribution companies) were not geared up, the bank said.