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Global infrastructure investment manager I Squared Capital, as part of its India strategy, has taken its first bet on the country’s green energy sector. It plans to invest $150 million in Amplus Energy Solutions Pvt. Ltd, which sets up distributed solar power generation projects in India.
Such a move comes in the backdrop of the government pushing renewable energy to the top of its energy security agenda. India needs as much as $200 billion to meet its target of installing 100 gigawatts (GW) of solar power and 60,000 megawatts (MW) of wind power by 2022. Of the planned solar capacity, 40,000MW has to come from solar rooftop projects.
“I Squared Capital has made a $150 million equity commitment. The funding will be used to expand operations in India and Asia. An announcement will be made shortly,” said a person aware of the development who did not want to be named.
Another person in the know of the matter said, “I Squared Capital will invest in Amplus.” An external spokesperson for Amplus in an email said, “Amplus recently received funding from I Squared Capital.” I Squared Capital is a private equity firm focused on energy, utilities, and transport in North America and Europe, and selects investments in the high-growth economies.
The firm, which includes ex-Morgan Stanley banker Gautam Bhandari as one of its founders, has been evaluating infrastructure projects in India. Mint reported on 10 July that I Squared Capital was in talks to acquire from NCC Ltd a majority stake in an Uttar Pradesh tollway project, and was also evaluating the Bangalore Elevated Tollway project.
International Finance Corp. (IFC), part of World Bank group, has also committed $100 million in equity to a joint venture with I Squared Capital to buy operating road assets. Amplus is headed by Sanjeev Aggarwal, who is former director, business development, AES (India) Pvt. Ltd—the Indian subsidiary of the US energy major AES Corp. The firm is one of the significant foreign investors in the Indian power sector.
The emphasis on solar and wind power is also expected to strengthen India’s standing at global climate change negotiations that culminate in a summit in Paris in December. In India, which is the biggest greenhouse gas emitter after the US and China, renewable energy currently accounts for 13%, or 35,777MW, of the total installed capacity of 2,74,818MW.
According to analysts, there is demand for rooftop solar power projects. “There is a large potential available for generating solar power using unutilized space on rooftop and wastelands around buildings. Small quantities of power generated by each individual household, industrial building, commercial building or any other type of building can be used to partly fulfil the requirement of the building occupants and surplus, if any, can be fed into the grid. The rooftop SPV (solar photovoltaic) systems on building’s roof space can be installed to replace DG (diesel generator) sets for operation during load shedding,” Yes Bank said in a 19 August report.
“With the current installed capacity of rooftop solar systems estimated at 300MW, and with SECI’s (Solar Energy Corp. of India) mandate to install 50MW capacity in the pipeline, the goal of achieving 40GW rooftop solar power seems beyond the bounds of possibility,” the Yes Bank report added.
Private equity (PE) firms have shown increasing interest in the green energy assets in India. Mint reported on 17 August about ReNew Power Ventures Pvt. Ltd, a renewable energy producer, being in talks with Switzerland-based PE firm Partners Group AG to raise $150-200 million.
A subsidiary of Singapore-based Sembcorp Industries Ltd acquired a 60% stake in IDFC Alternatives-backed renewable energy firm Green Infra Ltd for S$227 million in February. In the same month, Actis Capital committed $230 million to create an Indian renewable energy platform called Ostro Energy Pvt. Ltd. In 2012, Morgan Stanley Infrastructure Partners invested $212.03 million in wind power firm Continuum Wind Energy Pte Ltd.
Experts expect more deals in the space, as the cost of renewable energy falls. Solar and wind energy are nearing grid parity—a point in time at which they will cost the same as power produced from traditional sources and available on the nation’s transmission and distribution grid. At the same time, experts are wary about the weak finances of state electricity boards that purchase power from independent producers and distribute it to consumers.
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