The Indian Renewable Sector Consolidates with Another Big Bang Acquisition

The Indian renewable energy sector represented the Wild West around a decade ago when the whole scheme of auctions started to bid out solar energy projects. There were multiple companies, funds, investors entering this sunrise sector. There was not much in terms of entry barriers given that government auction schemes only had networth as the eligibility criteria (which is still there today). This allowed numerous new entrepreneurs and funds to aggressively bid and enter this new market. The government and customers gained from the intense competition in the form of very low tariffs.

The wind energy sector which used to be earlier run under feed in tariffs also came under the auction category given the success in the solar energy sector. However, the very low tariff was unsustainable and the players with the most firepower (in terms of low cost capital) have eventually expanded their marketshare. Adani Green Energy which is one of the most expensively valued renewable energy developer in the world has become the kind of the marketplace. It has further increased the gap between it and the second largest player Renew by acquiring a very large RE portfolio of 5 GW from Softbank Energy which is existing the Indian energy market. This takes its pipeline to 25 GW which is one of the largest in the world for any organization outside of China. The total value paid was a mix of debt and equity at $3.5 billion. The top three players now include Greenko commanding a substantial marketshare in all RE segments such as wind, solar and hybrids.

Most of the small companies have either exited the market or have a marginal presence given the huge pools of low cost capital required which is now only accessible to a handful of companies. Softbank which had big bang designs with Mr. Son making mega announcements regularly has strangely sold out without making good on its grandiouse designs. Given the strong success of its technology investments, it makes sense to get out of the low margin RE business.

AGEL now becomes even bigger and stronger particularly with its sister companies such as Adani Power and Adani Transmission, in the power energy space, also having a strong presence making the strongest power market force in India, so far. It remains to be seen if anyone can now come close to AGEL in terms of capacity or marketshare.

Also, read Interest in Indian Solar Assets remains High Despite COVID Crisis