A mountain of renewable assets is looking for buyers

Among the big names, Siemens Energy AG said it plans to sell its subsidiary’s Indian wind turbine unit, while Shell Energy, which acquired Sprng Energy in August 2022, is looking for investors. EQT and Temasek plan to sell their 4GW O2 power platform, while Macquarie is considering selling its solar project, Stride platforms and Vibrant Energy C&I platform. In total, 15-20 companies from the renewable energy industry are looking for investors.

But not all of them will find investors despite growing interest in green energy, said multiple investment bankers familiar with the sector, given oversupply and valuation mismatches. Moreover, they claimed that the success of some transactions could result in the entry of a new group of investors into the segment, as well as greater interest in commercial and industrial (C&I) assets.

“Core Markets”

“Siemens Gamesa will focus on the core markets of Europe and the United States, but will also serve other markets where profitable business is possible,” a company spokesman said about the sale of wind turbines. “The Indian market is fundamentally interesting for us; We have service commitments here that we will, of course, fulfill,” the spokesman said.

Many renewable energy companies are seeking funding to support growth, finance new projects, upfront investment and spur innovation as the sector flourishes.

“Not all renewable assets will attract investors as success depends on factors such as project viability, market conditions and risk-return profile,” said Suman Bannerjee, chief investment officer at alternative asset manager Hedonova.

Incoming investors will prioritize projects with solid financial outlooks, clear regulatory pathways and experienced management teams, Bannerjee said, adding that investor appetite is shaped by overall market sentiment and the performance of existing renewable energy companies. Therefore, while there is significant investment potential in renewable assets, the success of fundraising will depend on these critical factors, he added.

Too much supply?

According to a joint report by the Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research & Analytics earlier this month, India has floated tenders for over 69 GW of utility-scale renewable energy projects in FY24, well above the government’s stringent target. target of 50 GW, which indicates great interest in the sector. Solar and wind tenders accounted for 57% of renewable energy tenders issued in FY24, with the rest being wind-solar hybrid projects and renewable energy projects coupled with energy storage systems.

“While sector liquidity remains high, valuation expectations are unlikely to be met for several of these deals,” cautioned Prateek Jhawar, managing director and head of infrastructure and real estate investment banking at Avendus Capital.

Abhishek Joshi, executive director, head of India ECM, UBS Global Markets, said there is a significant amount of dry energy available in public and private markets, but it will go to “high-quality companies with solid business models, strong execution and high governance standards corporate.” access to this capital.

Focus on high-yield markets

At the same time, global companies reallocated capital towards markets with a higher rate of return.

Finnish company Fortum Oyj, which entered India in 2013, is selling assets in the country. In May, it exited its solar-generation assets in India and said it was evaluating options for its remaining assets. It said it would also not invest further in India.

“In line with its Nordic strategy, Fortum is reducing its exposure in India and is evaluating alternatives for its remaining operations and will not make any further commitments in India,” Fortum said in May.

Even in renewable energy companies, there is a tendency to recycle capital and create newer projects. Nasdaq-listed ReNew Energy Global Plc is in talks with Singapore’s Sembcorp Industries Ltd regarding the sale of solar energy projects with a total capacity of 350 MW, Mint recently reported. It is also considering selling 30% of shares in the 2.3 GW C&I project. Meanwhile, ReNew recently formed a joint venture with Gentari to develop 5 MW solar, wind and energy storage systems.

Other market participants include Aditya Birla, which is selling shares in its renewable energy platform. Macquarie Group wants to sell 400 MW of solar projects on the Stride platform, while Ayana Renewable Energy is also looking for buyers for its entire platform, Mint reported.

Investors say C&I projects may have an advantage in attracting capital.

As per IFC’s May disclosure, last month the International Finance Corporation said it was investing $125 million in 1.25 GW Fourth Partner Energy Pvt Ltd, which provides solutions to C&I clients in India.

Issuing an option

The increase in project complexity and potential profits increased the prospects for a stock exchange listing. However, sponsors remain cautious due to past experience and are conducting thorough internal assessments before some of these companies consider listing in fiscal 2026, said Prateek Jhawar of Avendus Capital.

So far, project developers have relied on foreign pension funds, sovereign wealth funds and private equity investors for development capital, but Neha Agarwal, CEO and head of capital markets at JM Financial, believes the next phase of growth could be largely largely financed from public markets.

“India has a target of achieving 500 GW of renewable capacity by 2030; we currently have 200 GW, including hydropower. To achieve another 300 GW in the next 6 years, the government sets tender targets of 50 GW of renewable projects per year,” she noted.

Additionally, many companies have achieved significant scale and size (financed by private capital) – almost 20 companies are larger than 1 GW and have a track record of operating profits; that’s why several renewable energy companies are now turning to capital markets to raise funds, she said. “We believe that high-quality names will be able to attract huge investor interest given the huge opportunities in the renewable energy space and the growing ROE profile of these companies,” Agarwal said.

Among the companies using public markets is Hero Future Energies, which has selected banks for its IPO. Warburg Pincus-backed Clean Max Enviro is also considering a $300 million initial public offering, Money control reported in May.