SoftBank may invest at least $20 billion in India’s solar energy projects

Softbank along with Bharti Enterprise and Foxconn Technology decided to invest the amount in the joint venture SBG Cleantech Ltd


Masayoshi Son (right), founder and chief executive officer of Japan’s SoftBank Corp., Nikesh Arora (left), president of Japan’s SoftBank Corp. and Sunil Bharti Mittal, chairman of Bharti Enterprises, shake hands before the start of a news conference in New Delhi on Monday. Photo: Reuters
Masayoshi Son (right), founder and chief executive officer of Japan’s SoftBank Corp., Nikesh Arora (left), president of Japan’s SoftBank Corp. and Sunil Bharti Mittal, chairman of Bharti Enterprises, shake hands before the start of a news conference in New Delhi on Monday. Photo: Reuters

New Delhi: In late 2014, SoftBank Corp.’s Masayoshi Son pledged to invest at least $10 billion in India over the following decade. On Monday, the Japanese firm said it was partnering Bharti Enterprises Ltd and China’s Foxconn Technology to invest at least $20 billion in solar energy projects in the country.

Since SoftBank has the majority in the solar venture, this will take the proposed investments by the storied Japanese company in India, across sectors to at least $20 billion. The actual number could be between $25 billion and $35 billion, Son said.

The solar energy joint venture, SBG Cleantech Ltd, plans to develop at least 20 gigawatts (GW) of solar energy generating capacity.

Foxconn, which accounts for 5% of all Chinese exports, will help in manufacturing of solar equipment for the project, while Bharti will provide on-ground support in India, Sunil Mittal, Bharti Enterprises’ chairman, said on Monday.

“We have already made considerable investments in the technology sector here. With this partnership, our goal is to create a global market-leading clean energy company to fuel India’s growth with clean and renewable source of energy,” said Son, SoftBank’s chairman and chief executive.

The equity structure is currently being worked out, the companies said at a press conference.

The exact equity holding of the three partners will depend on the debt raised by the new entity for the projects, Mittal said. SBG will be primarily debt-funded and has initiated conversations with Japanese and Indian banks.

The companies expect the first project to be operational in the next 18-24 months, subject to regulatory clearances.

Son, 57, met Prime Minister Narendra Modi on Monday and apprised him of the new project. Son and Mittal have also met energy minister Piyush Goyal, and minister of state for finance Jayant Sinha.

“Following the Indian Prime Minister’s 100GW solar and 60GW wind energy target by 2022, the venture will invest in and develop renewable energy plants across India,” the companies said in a statement. .

Former Bharti Airtel Ltd chief executive Manoj Kohli, who led the telco’s venture into Africa, will be the executive chairman of Delhi-based SBG Cleantech while Raman Nanda was named chief executive of the new entity. Nanda has been advising SoftBank since 2011 on clean energy infrastructure investments in the Asia Pacific region.

“A lot of work has already gone into this venture and we have our senior start up team ready,” Mittal said. He added that each GW of solar energy would require investments of at least Rs.6,000 crore.

Solar power plants also need a lot of land—a sticky issue in a country where land acquisition for industrial projects has become difficult and controversial.

Mittal said the solar plants the three partners are considering will only need non-cultivable, non-agricultural land and that this shouldn’t pose a problem.

According to Son, India has the potential to become one of the world’s largest solar energy generators. “The project in India can be four times more efficient than Japan given the country has twice more sunshine than Japan while cost of setting up the infrastructure is half of that in Japan. This means it is four times more efficient in India.”

The emergence of a large local solar energy generating business would mean an efficient and globally competitive solar energy equipment manufacturing business, Son explained.

“The costs and efficiency in logistics can make the cost one-third of what it is now,” Son explained, as part of the reasons why Foxconn is a partner.

Media reports say that Foxconn is trying to re-enter India in a meaningful way and looking for locations and partners for its electronics manufacturing business. Some reports have also said that it may invest in local marketplace Snapdeal.

In October, SoftBank, the largest shareholder in Chinese e-commerce giant Alibaba Group Holding Ltd, committed to invest $837 million in Snapdeal.com and online taxi booking service Ola. In November, SoftBank invested about $75 million in online real estate portal Housing.com.

While SoftBank’s key focus area continues to be around information revolution, Son said he started focusing on clean energy following the energy crisis that hit Japan in 2011.

The solar energy business in India is likely to grow 250% in 2015, the companies said in a statement.

Arunabha Ghosh, chief executive, Council on Energy, Environment and Water, points at the size of the opportunity in India’s solar market as one of the key drivers attracting investors.

“India’s solar capacity has gone up from 18MW in 2010 to 4,000MW,” he added. “Secondly, now that government has formally put forward a 100GW target, investors want to come in early and have the first-mover advantage. Thirdly, tech investors will see an opportunity because such a big market would require manufacturing capacity to be built domestically.”

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