New Delhi: Masdar, also known as the Abu Dhabi Future Energy Co., has acquired around 20% in Hero Future Energies Pvt. Ltd (HFE) for $150 million, valuing the Indian renewable firm at $750 million.
“The strategic investment of $150 million by Masdar will help facilitate the further expansion of HFE in India and other key growth markets," Hero Future Energies said in a statement on Monday.
Masdar is owned by the UAE government’s sovereign wealth fund, Mubadala Investment Co. Sovereign wealth funds are preferred investors for their so-called patient capital, which seeks modest yields over time.
The investment in the renewable energy firm comes against the backdrop of India’s growing strategic engagement with the UAE. Also, the UAE has supported India’s position over the issue of New Delhi revoking a provision in its Constitution that gave special status to Jammu and Kashmir.
Annual bilateral trade between India and the UAE stood at about $60 billion in 2018-19 and the UAE was India’s third-largest trade partner. The UAE is also a key source of energy for India, being the fourth-largest exporter of crude oil for India.
The Indian renewable energy sector is going through a rough phase, with delayed payments to generation utilities. The payment delays by state-run power distribution companies range from two months to 15 months. Besides, there are problems with non-allocation of land to wind power projects, as well as transmission and connectivity challenges.
“Hero Future Energies and Masdar are ideal long-term strategic partners. We have clear alignment in our core ambitions. We are committed to advancing the development, commercialization and deployment of cutting-edge renewable power solutions," Rahul Munjal, chairman and managing director of Hero Future Energies, said in the statement.
The deal also comes at a time when credit availability for renewable energy firms has dried up. Large lenders such as State Bank of India have curbed funding for projects selling power at less than ₹3 per unit. Most lenders are wary of the viability of projects with rock-bottom tariffs.
IFC had invested $125 million in Hero Future Energies in 2017. Hero Future Energies plans to build a 5 gigawatt (GW) portfolio by 2022 and expand its operations in Africa and India, and be present across the solar energy value chain.
“With HFE’s new relationship with Masdar, we see that vision taking shape as IFC intends to continue its long-term partnership in supporting the company’s growth in India and international markets," Shalabh Tandon, head of operations for South Asia at IFC, said in the statement.
India and UAE have been expanding on their engagement on the energy security front. State run-Abu Dhabi National Oil Co (Adnoc) last year joined hands to set up the largest global refinery and petrochemicals complex coming up in Maharashtra. Adnoc is also a partner in India’s crude oil reserve programme.
There is also a growing overseas interest in India’s emerging green economy. A case in point is Malaysia’s state-owned oil and gas company, Petroliam Nasional Bhd, or Petronas, acquiring I Squared Capital’s majority stake in Amplus Energy Solutions Pvt. Ltd, one of India’s largest rooftop solar power producers.
Hero Future Energies also plans to put up a large grid-connected solar plant of up to 100 megawatt capacity in South-East Asia. Alongside traditional renewable projects of solar and wind, Hero Future Energies is focusing on futuristic renewable energy projects utilizing new technologies, including battery storage and floating solar.
India’s emerging green economy is expected to require investments of around $80 billion till 2022, growing more than threefold to $250 billion during 2023-30.
India has taken the lead as a clean energy champion and is globally ranked fourth and fifth in installed capacities for wind and solar power, respectively. The country has an installed renewable energy capacity of 83GW and is running the world’s largest renewable energy programme with plans to achieve 175GW by 2022 and 500GW by 2030, as part of its climate commitments