Goldman Sachs invests in ReNew Power, India
Investment giant Goldman Sachs is sharply increasing its investment in renewable energy projects around the world. The company invested in building a large solar farm in Japan which is going through a massive boom. The huge subsidies being given by the government there have led to gambling operators opening solar plants. So it is not a big surprise that Goldman Sachs has followed the footsteps of the gamblers.
Now the company is doubling up its investment into the Indian green energy sector by giving a huge second tranche of investment into ReNew Power which is a wind energy farm operator in India. The Sumant Sinha operated outfit is one of the few green focused utilities in India that are doing quite well. While the rest of the power sector is facing large losses on account of incomplete projects and high cost of fuel, the green sector is motoring along. The regulatory uncertainty is smaller in case of green energy, which is being incentivized by the government. ReNeW Power is privately held like some of the other green utilities. Orient Green Power which is the only Indian listed green power company is being taken private by its promoters. This company has shown large losses due to implementation problems and focus on biomass plants. Note biomass plant focused companies like A2Z have not done well because of the problem of biomass availability and lowering of feed in tariffs for biomass energy.
Morgan Stanley and Bank of America have also invested in renewable energy assets in India in the past. Greenko which is a UK listed company has shown good results in the past and is also growing strongly. Wind Energy in India is showing a shift to companies focused on the sector. Earlier every Tom, Dick and Harry used to build a wind turbine to take advantage of the accelerated depreciation benefit. But with the removal of this capital subsidy, energy production focused companies are growing as the subsidy is in the form of GBI.
Goldman Sachs has invested additional $135 million in ReNew Power, raising its total investment in the company to $385 million and making it the biggest private equity investment in India’s renewable energy sector.ReNew Power, which was founded by Sumant Sinha who was earlier the chief operating officer of wind turbine major Suzlon Energy, has 200 mw of wind turbines in operation. It aims to scale up its capacity to 500 mw by end-2014 and 1,000 mw to 2015.Confirming the development, Sinha said, “Goldman Sachs has long-term interest in renewable energy sector and has therefore invested another $135 million. With this investment, we have enough equity base to set up 1,200- 1,300 mw of capacity.” In 2011, Goldman Sachs invested $200 million to acquire majority stake in ReNew Power. It later invested another $50 million.
The renewable energy sector, led by wind energy, in India is seeing a rebound in investment with around six deals worth $650 million (including this deal) being sealed so far in 2013. “Its been pretty tough for the sector due to the uncertainty around GBI and the collapse of the REC market. Valuation of projects are now different from what they used to be,” Sinha said. India plans to double its renewable energy capacity to 55,000 MW by 2017.