New wave of investors eyes renewable energy firms

The growing importance of sustainability-linked funding has driven investors to scout for clean energy opportunities

Swaraj Singh Dhanjal
Updated20 Aug 2021
In the four months to July, investments in Indian clean energy sector hit $6.6 bn
In the four months to July, investments in Indian clean energy sector hit $6.6 bn(Photo: Mint)

Driven by the growing importance of sustainability investing and the large opportunity presented by the Indian market, several new investors, both financial and strategic, have committed capital to renewable energy investments in the country.

Earlier this month, US investment firm Augment Infrastructure said it will buy a majority stake in rooftop solar power producer Mumbai-based CleanMax Enviro Energy Solutions for 1,650 crore, marking its first investment in India. Also in August, Copenhagen Infrastructure Partners, a renewable energy-focused fund manager, announced its first India investment with a commitment of $200 million investment with Amp Energy India. Other investors that have written large cheques in recent months include Thailand’s state-owned utility PTT, Norway’s state-owned investor Norfund and Norway-based renewable energy firm Scatec.

The Indian renewable energy industry has significantly matured over the past 4-5 years, industry experts said. Investors sitting on the fence now have rich data and a track record to analyze the market, which has given them the confidence to finally write cheques.

“There is more information available for investors to analyze in determining an appropriate view and strategy for the market. Over the past five years, we have seen consistency in several areas, including predictable payments from counterparties, regular auctions, government support, access to debt financing, and increasing scale. Areas that are inconsistent have also emerged, including receivable cycle variability across a range of state discoms, the success of M&A as a strategy for growth, and timelines for power sale agreement execution. Ultimately, this information allows new entrants to take a considered view,” said Rahul Goswami, managing director, Greenstone Advisors LLP, a boutique investment bank focused on the renewable sector.

The growing importance of sustainability-linked investments has also driven new investors to scout for renewable energy opportunities in India. “Increasing capital allocation for sustainability-related investments globally is benefitting India. Developed markets remain crowded, and more investors are considering expansion into emerging markets. India is favourable from a scale perspective, and the increasing proportion of reputable groups driving growth. Additionally, numerous marquee investors from across the globe have made investments in the sector, signalling meaningful validation for other potential investors,” said Goswami.

The pool of capital looking at the Indian renewables sector is only going to expand further, said Prateek Jhawar, executive director and head, infrastructure and real assets, Avendus Capital, adding that markets like the US could become an important source of foreign investment in Indian renewables in the coming years.

“Given our target to build renewable energy capacity to the tune of 450GW by 2030, India presents one of the largest opportunities globally for investors with sustainability mandates. India has attracted capital from sovereign and pension funds from the globe, and now newer development funds with newer allocations are also looking at India. The US, while it has had an indirect exposure through PE funds, has so far not participated much in this space. The US SPAC listing of ReNew Power could change this as it will create more awareness,” he said.

In the four months to July, investments in the Indian renewable energy sector reached $6.6 billion, surpassing the $6.4 billion level for FY21 and are on track to easily overtake the $8.4 billion total achieved in 2019-20 prior to the pandemic, the Institute for Energy Economics and Financial Analysis (IEEFA) said in a research note on Thursday.

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