India’s green power producers will get a shakeout

Sembcorp Industries

24/12/2024 08:30

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own.)
    By Shritama Bose
       MUMBAI, Dec 24 (Reuters Breakingviews) - Dealmaking is
coming for India’s renewable energy industry in 2025. More than
a dozen generators of wind and solar power are looking for new
owners as private equity-style firms like Brookfield Asset
Management, as well as industry players like Siemens and Enel,
look for an exit. Despite New Delhi’s target of renewables
providing half the country’s electricity by 2030, success isn’t
assured.
    Hitting that goal will require around $200 billion of
investment, analysts at Nomura reckon. But companies are getting
finicky about deploying capital in a market where tariffs for
solar power – the single largest subcategory – have moved in a
narrow range since 2019.
    Sellers may be overly optimistic on valuations, too.
Investment fund owners like Brookfield, GIC and Macquarie spent
much of 2024 scouting for and haggling with prospective buyers.
India’s Inox Wind hinted on an earnings call in October that the
Siemens Gamesa wind assets it took a look at were overpriced.
    Some deals are set for completion after months of wrangling.
A unit of Malaysia’s Petronas has agreed to buy part of
Brookfield’s portfolio for $900 million, the Economic Times
reported in November. Other potential buyers include JSW
Energy’s  JSWE.NS  renewables unit and Singapore’s Sembcorp.
Perhaps the biggest test will be what happens to GIC’s 50% stake
in Greenko, which has 7.5 gigawatts of net installed capacity;
Bloomberg reported in October that the Singapore sovereign
wealth fund was considering selling part or all of its holdings.
    Those who cannot secure an industry sale do have another
option: an initial public offering. Public markets in India are
now seen as mature enough to buy into companies in emerging
sectors with earnings some way off. That’s a far cry from 2021
when ReNew Energy  RNW.O , the country’s second-largest green
power producer by capacity, went public on Nasdaq by merging
with a blank-cheque company.
    State-owned NTPC Green Energy’s  NTPG.NS  strong public
market debut in late 2024 will buoy sentiment. A listing may
work best for companies that have scaled up to a couple of
gigawatts, such as Brookfield-backed CleanMax, and Hero Future
Energies, whose sponsors include KKR  KKR.N . It could be harder
for firms with smaller amounts of installed capacity and less or
no cash flow.
    The coming shakeout in Indian renewables will reveal whose
capital New Delhi might be able to rely on as its 2030 goal
looms.
    Follow @ShritamaBose on X
    
    This is a Reuters Breakingviews prediction for 2025. To read
more of our predictions, click here.

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Graphic: India may surpass its 2030 green grid target    https://reut.rs/4iBo2xO
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 (Editing by Antony Currie and Oliver Taslic)
 ((For previous columns by the author, Reuters customers can
click on  BOSE/ 
shritama.bose@thomsonreuters.com))