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The reinstatement of tax benefits and generation-based incentives for wind power seems to have brought back the confidence of independent power producers (IPPs). The ‘Make in India’ campaign, too, has made the wind power sector an attractive investment arena once again.
While the wind power sector was deprived of any policy incentives for about a year, the Union Budget 2014 re-introduced tax benefits such as accelerated depreciation of 80 per cent for wind power projects. It also approved the continuation of ‘generation-based incentive of 50 paise per one unit of power produced. These move came in the wake of wind power capacity addition falling by more than half to 1,700 megawatt (Mw) annually in 2013. According to officials in the know, major players in the wind power sector were being pushed by the ministry of new and renewable Energy to eye a target of 10,000 Mw of capacity addition annually. Tulsi Tanti, chairman and managing director of Suzlon, told Business Standard that earlier, the sector had been pursuing the government to get necessary assistance. But now, the government is encouraging companies to scale up power generation saying it is ready to give any policy push that is needed.
According experts, consolidation in the sector is the way forward as smaller projects find it increasingly difficult to access growth capital and compete with projects of plus-500 Mw. While the smaller companies prefer the offer-for-sale route to raise funds, big names are looking at raising money to invest in big-ticket projects. Wind power projects of several companies such as Techno Electric, Orange, and Powerica having 100-150 Mw capacity are on the radar of buyers. The companies, which ventured into wind power to earn tax benefits, are also looking to sell off their assets.
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“Large projects would get access to cheaper sources of capital for additional growth. The next two-three years will see the emergence of 3-5 Gw (gigawatt)-plus companies and eight to 10 sub-200 to 500-Mw portfolios that would be obvious targets for acquisition,” said Sanjay Chakrabarti, partner (clean-tech) at EY.
Bharat Light & Power (BLP), which acquired the wind portfolio of DLF, is on the lookout for more such projects. “BLP is trying to establish itself as a major wind IPP player. The company is on the lookout to acquire wind projects of around 100 Mw,” said a wind market expert. BLP has 200 Mw of wind projects, of which 150 Mw was acquired from DLF.
Among the others scouting for projects are Green Infra, the green energy arm of IDFC; Leap Green Energy and Inox Wind. The market buzz is that solar power players such as Hindustan Powerprojects, Azure Power and NuPower are also looking to expand their portfolios in the wind power sector.
“The wind market is keenly awaiting the route that some of the larger IPPs take to provide returns and exits to promoters and investors. The outcome would determine not only the next stage of renewable IPP growth in the country, but also provide realistic market-determined benchmarks to unfold consolidation for smaller players,” said Chakrabarti.
The next financial year is likely to see fund-raising activity by some prominent companies in the sector. Sumant Sinha-promoted ReNew Power is looking for an initial public offering in another six or eight months. Goldman Sachs has made an initial investment of $375 million in the company.
Welspun Energy, which has a broad portfolio in clean energy, is also looking for investors for its upcoming wind energy projects. Infrastructure Leasing & Financial Services is on the lookout for the same. These two companies are actively involved in setting up wind power projects through the IPP route across the country, said a clean energy market expert.
“The wind industry as a whole - manufacturing to IPP - is a classic role model for Make in India. The industry has the potential to deliver 5,000-7,000 Mw on an annual basis and requires clear and consistent long-term government policy that would enable the stakeholders to plan in advance, said Chakrabarti.
Out of the total renewable energy base of 32,000 Mw in the country, wind is 21,900 Mw and solar is 2,700 Mw.
BANKING ON THE WIND
- Smaller companies, up to 100 mw wind projects up for sale
- BLP, Inox, Green Infra, Lear Green scouting for projects to acquire
- ReNew Power, Welspun, IL&FS to set up big projects, on look out for fund raise
- Solar Power companies could also enter the wind IPP industry
- Government is asking wind companies to cumulatively aim for 10,000 mw of capacity addition annually
- Current annual capacity addition: 1,700 mw last year. This year till yet: 800 mw, likely to reach 2,000 mw
