ADB, World Bank's IFC, DEG pump $275 million into Fourth Partner Energy

Largest equity deal by 3 investors in Indian RE sector

Global fund houses Asian Development Bank (ADB), World Bank’s IFC and Germany-headquartered DEG have pumped in an aggregate equity investment of $275 million (around Rs 2,000 crore) in Hyderabad-based green energy platform Fourth Partner Energy (4PE). This makes it their largest investment in India’s renewable energy (RE) sector.

With this, the new investors, along with existing Norfund and TPG Global, hold 90 per cent stake in 4PE, with two founders holding the balance.

Of the total investment, IFC led the pack with $125 million, followed by ADB with $100 million and DEG $50 million.

TPG Global, which was one of the earliest investors in the company, has made a partial exit, 4PE executives indicated while not confirming the stake sale amount.

Vivek Subramaniam and Saif Dhorajiwala, along with a third founder, established 4PE in 2010. It was a green energy solutions provider for commercial and industrial (C&I) consumers.

The company offers customised solutions to C&I customers for their green-energy needs.

These range from rooftop solar, open access green energy, round-the-clock green power to hybrid (solar + wind + energy storage).

Announcing the deal in Delhi, Subramaniam said they have a portfolio of 1.5 gigawatt (Gw) and are aiming to build a 3.5 Gw capacity by 2026-27.

“While all the investors hold 90 per cent stake, none hold a controlling stake. But the investment strategy and variety of funding instruments that these large fund houses have to offer will bolster our growth plans. We will be collaborating with these investors on innovative financing tools, invest in more energy technologies and enter new geographical territories,” he said.

ADB, which has recently transitioned into a ‘climate bank’ for Asia and Pacific regions, is aiming to scale up C&I business opportunities in India with the 4PE investment and build a sustainable model.

“The structure of the company is poised for growth. We want to take 4PE to other countries, especially lesser-developed ones and replicate this model of energy transition. Along with the team and other investors, we would also develop new and innovative financing models in this segment. The asset class allows multiple financing models and through those, the cost of green energy would also come down,” said Mayank Choudhary, director, infrastructure finance, ADB.

IFC’s regional industry manager for infrastructure, India, Jason B Pellmar said it has been associated with 4PE as a debt lender but now as equity partner, it can add value to future projects and investment.

“We are particularly bullish on new green energy technologies which we hope to induce in future projects – green hydrogen and battery storage, among others. We have a pre-investment advisory, which will be available for future projects of 4PE. IFC in India has recently firmed up a C&I strategy and this investment fits right into it,” Pellmar said.

DEG, which has marked its entry into the C&I segment, almost a decade after it invested in utility scale RE projects in India, said the investment is in sync with its focus areas.

“Globally, we have decided our core focus areas will be climate, impact, and long-term investment. We are in it for decades, not years. 4PE is rightly placed on the other two focus areas of DEG,” said Florian Munkle, vice-president, infrastructure & energy, global equity, DEG.

For the upcoming 3.5 gw, Subramaniam and Dhorajiwala said it will be a combination of on-site projects, state-level open access in whichever state it is favourable, inter-state projects and green energy open access.

“Our major focus is on hard-to-abate sectors as they are keen to adopt green energy, offset their emissions and earn carbon credits,” they said.