Renewable Energy Sector Sees Investment Surge In 2015

Increased green energy drives by governments and social groups and changing regulatory environment to promote this sector across the world have boosted investor confidence in the renewable energy sector.

Total global corporate funding in this sector, including venture capital (VC) and private equity (PE), debt financing and public market financing, raised by public companies shot up to a record $15.4 billion in 2015, posting a jump of around 25 per cent as compared to $11.8 billion in 2014.

Global VC investments rose to $520 million in 14 deals in 2015, compared to $311 million in 15 deals in 2014, according to a Mercom Capital report released on Tuesday (February 2).

Wind downstream companies accounted for most of the VC funding with $505 million of the $520 million raised, said the report by Mercom, a clean energy communications and consulting firm.

It tracked funding and merger and acquisition activities for the wind sector in 2015.

India, which saw a fresh wave of policy initiatives and government thrust on green energy sector in 2015, had also witnessed an increased fund flow in this sector.

Investors and renewable energy project developers from around the world responded positively to the change in regulatory and financial environment in India during the year.

International private equity companies invested at least $1 billion in renewable energy companies in India in 2015. Just the top 5 deals in the renewable energy sector crossed a cumulative volume of $1 billion.

Initiatives In India
India attracted increased investments after the new government announced ambitious capacity addition targets for 2022, said a December report by CleanTechnica, a news and analysis website focused on clean technology.

The Indian government had in January 2015 set a goal of creating capacities for 100 gigawatts (GW) of solar power, 60 GW of wind energy, and 15 GW of other renewable energy in the country by 2022. The country currently has a renewable energy capacity of 35 GW. The government had also estimated that this additional capacity creation would require an investment of about $100 billion.

The Mercom report said that globally the top VC funded company in 2015 was India’s ReNew Power Ventures, an independent power producer, which raised $265 million. ReNew roped in Abu Dhabi Investment Authority with funding of $200 million and the balance investment was made by Goldman Sachs and Global Environment Fund. With these two investments, the total private equity investment in ReNew Power has now gone up to $655 million.

While, Eren Renewable Energy, a renewable energy project developer in Luxemburg, raised $114 million, followed by Apex Clean Energy, a renewable energy company of Virginia, which secured $80 million in two separate deals, and UrbanWind, a wind project developer in UK, raised $45 million.

But, public market financing in the wind sector was down this year with $2.8 billion in 20 deals, compared to 16 deals for $3.7 billion in 2014. There were three public issues (IPOs) in 2015, including two yield companies, raising a total of $1.3 billion.

Large-scale project funding deals in 2015 totalled $18.3 billion in 101 deals compared to $19.9 billion in 120 deals in 2014. A total of 113 investors participated in these deals. Top investors continued to be development banks including KfW IPEX-Bank, which funded 14 projects, Brazilian Development Bank with nine, Santander with seven and Overseas Private Investment Corporation, which funded five projects. While there were 48 mergers and acquisition deals in wind energy sector in 2015. It was 28 in 2014. Out of these 48 deals, wind downstream companies accounted for 32 in the period under review as compared to 20 in 2014.

The largest mergers and acquisition deal in India was GE Energy Financial Services’ acquisition of an undisclosed stake in Welspun Renewables Energy, which operates India’s largest solar power project at present.

The Singapore government’s investment arm GIC also signed an investment deal with Greenko Group Plc for the $253 million acquisition of Greenko Mauritius in 2015.

Greenko is the direct owner and developer of several renewable energy and power assets in India. It owns several power plants in India based on wind, hydro, biomass, and natural gas power technologies, with its largest footprint in the wind energy sector. The company currently operates over 800 MW capacity, including 5 wind energy projects across the country.

The other wind energy project developer that raised sizable funding in this space was Ostro Energy, which raised $230 million from Actis Advisors. Ostro Energy is currently looking to expand its presence in India’s wind energy market, and the company plans to add another 800 MW capacity over the next few years.

Another Indian company Orient Green Power also managed to raise $153 million from Forefront Capital Management in 2015.

As part of the renewed policy focus on the renewed energy, the industry players have also started investing in fresh technologies. The country’s largest wind power turban maker Suzlon Group, which received new investments from high net worth individuals including Sun Pharma promoter Dilip Shanghvi in early 2015, had last week opened its new blade science center in Vejle, Denmark, to accelerate its vision to become a leader in technology in the wind industry.

"The new blade center is aligned to our vision of being the technology leader in the global wind sector," says Tulsi Tanti, chairman, Suzlon Group.

Tanti added that the group believe that a new wave of innovation is required to unlock the true potential of renewable energy.

Globally, the largest mergers and acquisition transaction in 2015 was the purchase of Pacific Hydro by China’s State Power Investment Corporation for $2 billion. There were 154 wind project acquisitions in 2015 for nearly 30 GW compared to 2014 also with 154 transactions, for about 25 GW of wind projects. Investment funds once again led project acquisitions with 9 GW in 2015, followed by project developers with 8 GW, utilities with 7 GW and yield companies with 5 GW of wind project acquisitions.