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Based on the newsletter I sent a week back:

Banks and the National Solar Mission

Firstly, on solar and on the National Solar Mission. The guidelines for both offgrid and connected solar have been issued, and folks have started submitting applications for both. Now starts the fun of all the developers looking around for funding. As is well known, most of these solar fundings will be working on a mix of debt and equity (typically in a D:E ratio of 70:30). The question is, are the banks in India ready to fund such projects? Listen to this: “Banks want tax-free bonds to fund solar projects – Seek credit guarantee by IREDA for technology risk involved. (Source: http://bit.ly/apF62u ) – Indian banks funding renewable energy projects will require long-term resources, for which they should be allowed to float tax-free solar bonds. Another risk with regard to financing such projects is that the technology could become obsolete very quickly, which could make the completion of the project unviable. Speaking at the CII seminar on financing of solar projects on Wednesday, Mr S. Sridhar, Chairman and Managing Director, Central Bank of India, said that banks should be allowed to float tax-free solar bonds, of about 10-15 years duration. This will enable them to raise long-term resources. He also said that the IREDA (Indian Renewable Energy Development Agency) could look at some kind of credit guarantee scheme for such projects. “Most banks understand credit risk, but not technology risk,” he said. The bankers at the meeting had claimed that their banks had already lent good amounts of money to solar. Central Bank of India’s Chairman and Managing Director, S Sridhar, said the bankers’ biggest worry while lending to a solar project is the long gestation period of around 10-12 years. He suggested banks be allowed to float special solar bonds of long duration like 10-15 years. SBI’s Bhatt said SBI has so far lent Rs 1,000-crore for solar projects while India Bank’s Misra said his bank has done Rs 1,900-crore. (Source: http://bit.ly/bgGZ0a ). That’s a lot, presumably these have gone into cell and module manufacturing units?

While on the National Solar Mission, here’s a nice analysis of India’s Solar Opportunities and Challenges, written by Raj Prabhu of Mercom Capital Group and Alfonso Velosa III of Gartner – http://bit.ly/ccaB2q

Equity Investments – PE and IPO

Still on investments, it was good to see a $ 300 million investment from private equity company Blackstone into India’s best known solar PV company, Moser Baer. (Source: http://bit.ly/bIDDOC)

Another company eyeing PE funding for solar is Clover Solar. Solar Energy provider Clover Solar Pvt Ltd (CSPL) is looking to raise Rs.50 Cr through private equity by diluting around 25% stake to fund its solar power projects . The deal will value CSPL at around Rs.200 Cr. It is making a Rs.300 Cr investment over the next two-years to set up 25 MW of solar power plants pan-India. The project will begin with a 2MW plant at Supa near Pune at a cost of Rs.35 Cr, which it hopes to get operational by March 2011 and which will be funded through a mix of debt and internal accruals. (Source: http://bit.ly/d6bhmX)

Last week, Orient Green Power announced plans to Rs 900 cr through an IPO. The company, an associate company of Shriram EPC, said it would launch an IPO in Sep to raise around Rs 900 crore to part finance its generation capacity expansion. The company has plans to invest about Rs 4,000 crore for increasing the capacity to 1,000 MW by March 2013, from 230 MW as of now. Most of the investments are expected to go into biomass based power production. Currently, its plant in Vandhavasi (TN) is already operating. It is about 7.5MW plant, which took abuot Rs 40 crore investment. The company is also engaged in the construction of various projects in Maharashtra, Tamil Nadu, Andhra Pradesh, Rajasthan and Madhya Pradesh for generating 73.5 MW using bio-mass. (Source: http://bit.ly/aRbFoZ)

While on IPOs, Bhilwara Energy also plans the IPO to raise up to Rs 1,200 crore, mainly for hydro power (Source: http://bit.ly/aMwY4p)

Veering from investments to the other side of finance, returns, renewable energy certificates appear to be gathering accelerated attention. Indian Energy Exchange (IEX) and Power Exchange India (PXI), both involved in day-ahead trading, have approached the Central Electricity Regulatory Commission (CERC) for introduction of renewable energy certificate (REC) contracts. (Source: http://bit.ly/cnPQPU ). CERC sources said it had asked IEX and PXI to undertake a test run of the software for various scenarios, with at least 10 test cases covering the different types of demand/supply curves. That’s good news indeed. In fact, one of the panelists in the session I chaired last week at a renewable energy conference in Chennai was from IEX and his topic was specifically on RECs.

In an interesting interview with The Energy Report, Vikas Ranjan, founder of Ubika Research Vikas offers some strategies on how to investors should play the cleantech sector and discusses in detail several clean-technology companies ready to flourish. It really is an interesting and thought provoking interview. Source: http://bit.ly/dx212Y


EAI Inventor Zone

We at EAI are passionate about sustainability and have been a catalyzing force for the renewable energy movement in India. In order to encourage innovations in the renewable energy sector, EAI invites researchers, students and Industry professionals to submit their renewable energy based inventions. We will assist the proponents of the best ideas in commercializing their inventions. Read further for more details. http://www.eai.in/ref/invent/invent.html


Venture Capital

And then hear to why the VC market is not exactly pleased with cleantech – “For a sector that’s on the must-have list of almost all investors, the clean technology space has seen deals dwindle by half this year in an otherwise vibrant venture capital (VC) and private equity (PE) market. The absence of mature companies with a track record of growth and profitability, and a lack of exit options are impediments in backing clean tech firms, investors say.” I am not sure whether the author is talking about VCs or PEs – VCs do not look for mature companies! Anyway, the article contiues with a quote from DFJ India: “The prediction that clean tech and green tech will be the theme of investments in 2009 and 2010 has not panned out. VCs are struggling to find VC returns (20-30 times) on the capital requirements of these investments,” says Mohanjit Jolly, managing director, DFJ India.
More from here – http://bit.ly/9VRuKl

And as if to just prove the earlier opinion wrong, we have the news item “India Venture Partners invests in Gensol Consultants” – Gensol Consultants Pvt. Ltd., one of the leading carbon consultancies in India has successfully raised capital for 15-20% stake to a US based venture capital firm, India Venture Partnership Ltd., managed by India Venture Partnership Management, a Mauritius GBL1 company, with the deal being of an enterprise value within the range of US$4-US$6mn.
More from here – http://bit.ly/c9N6PG

Corporate Investments

Going back to investments, engineering major ABB inaugurated a wind power generator factory in Vadodara, India. This is the company’s fourth wind power factory in India, engaged in the supply of wind power generators to power plants in India as well as worldwide. Source: http://bit.ly/9fvmpS

M&A

For those keen on M&A in renewable, there is interesting news that says “China, India among top five nations in green energy M&A deals” – Post-recession, rene­wable energy sector has witnessed heightened mer­ger and acquisition (M & A) activity and China and India are among the top five countries globally to witness large number of transactions in past four quarters. Worldwide, Solar segment witnessed largest deal value among the segments at $7.2 billion, followed by wind and biofuels. In terms of countries, China saw the highest transaction value at $5.4 billion with 23 transactions in the past 12 months (July 2009-June 2010). US came in second with a value of $2.6 billion through 72 deals. Spain too saw a deal value of $2.6 billion through 36 deals, while Philippines came fourth with a total deal size of $1.6 billion through seven deals and India ranked fifth at a deal value of $1.1 billion through 14 deals. Source: http://bit.ly/92qxWg

And the Rest

ADB announced plans for $1 billion investments in Asian renewables sector – Source : http://bit.ly/axGnw8

Most Indians can never stop waxing eloquent about the “most enterprising state” – Gujarat. Here’s another ode to the state, with an emphasis on power and renewable energy investments – http://bit.ly/aoZDZu

And for folks who still are not convinced about the need for renewable transport fuels, here come the alarm bells – “India overtakes Japan in demand for oil” ( http://bit.ly/c6Ihd0 ) – India overtook Japan in demand for oil among Asian nations in the second quarter of 2010, reflecting its rapid economic growth, according to Platts, a provider of information on energy and metals. The country’s demand for oil in April-June stood at 3.1 million barrels per day (mbpd), marginally higher than Japan’s 3 mbpd. China, with a demand thrice the size of India’s, registered the highest demand for oil in Asia. Hmmmm, we consume 3.1 mbpd, but produce just about 1 mbpd. While leaves us importing 2 mbpd every day, that’s 730 million barrels per year. At $75 per barrel ($73.28 earlier today), that’s $55 billion spent on importing oil every year. That easily negates all our hard earned FDI (about $30 billion in 2009). Do we need better reasons to start investing in biofuels?

And finally, here is a brief but interesting article that tries to analyse the question: “Can Power sector become the next Telecom sector?” and concludes “Although Power sector currently with Industry P/E (Price Earnings Ration) at 24.48 is ahead of Telecom sector with and industry P/E at 16.55, it has still a long way to go. One thing is clear, Regulator in any sector has the potential to change the market structure, enhance competition and make a difference.” Source: http://bit.ly/9dHFcu