Indian Renewable Independent Power Producers make hay while the Modi government's sun shines

Most Indian Renewable energy independent power producers have not given great returns, except those which avoided biomass energy. Problems with land acquisition, regulatory delays and evacuation infrastructure issues have made returns low for most of these companies. These are systematic issues which is present with the whole of the power industry in India, which is bogged down by years of bad policy planning. Even today most states in India suffer from massive transmission losses in the high double digits of 20-30%, compared to the low single digits in China. The distribution utilities heavily subsidize power and do not get the subsidies on time. The result is that they make huge losses and are unable to pay the power generators. These again leads to losses for power producers which ultimately gets passed on to the Indian consumers.

In fact, this is such a major problem that many farmers in India are willing to pay money for reliable electricity even when they get poor quality power for free from the government. These issues will not be solved in one day, however the government is trying to improve things. The massive renewable energy targets and the strong support shown by the government have brought the Indian IPPs focused on RE in focus. These are getting strong interest from foreign investors and are looking to leverage that interest by selling out or raising money for expansion.

Many of these IPPs are backed by PE or investment banks such as Morgan Stanley, Blackrock and others. Azure Power is looking to do an IPO in the USA to raise capital. The company has strong links with USA having raised loans from IFC and US EXIM bank. SunEdison which has become the world’s largest RE focused IPP is looking to buy an Indian IPP firm outright. The company which wants to do an emerging markets yieldco wants to increase its RE assets rapidly. There have been rumours that the company is looking to buy wind focused IPP Continuum Energy which is backed by Morgan Stanley.

India needs massive amounts of funding around $200 billion in the next 5-6 years to reach its 175 GW RE target. With most Indian financial institutions facing huge capital constraints due to bad debt, foreign capital is the key in meeting those targets. Raising money through PE, capital markets, pension funds and international financial institutions is going on.