The World's #1 Renewable Energy Network for News, Information, and Companies.
Untitled Document

“Unusually High” Wind Sector Funding Focuses on India

Venture capital funding in the wind sector was unusually high in the second quarter of this year, according to Mercom Capital’s quarterly wind funding and M&A report, with US $195 million going to two companies in India. Both companies are project developers, said Raj Prabhu, Mercom’s CEO.

According to the report, wind sector venture capital funding totaled $210 million in four deals in Q2 2013, compared to $16 million in three deals in Q1. Total wind sector funding was $3.5 billion in Q2, including VC funding, debt financing and announced project funding deals.

Prabhu attributed the report's high numbers to “opportunistic investment” – investors taking advantage of favourable policy conditions. Wind investment is still largely policy-dependent, Prabhu confirmed; in regions where tariffs are healthy there will be more money coming in. “Nobody wanted to touch India for a while after the Generation Based Incentive (GBI) stopped,” he said. Cancellation of the incentive had caused a drop of 1500 MW in wind power production in 2012-13, according to the Indian Wind Energy Association – but "as soon as the government announced it had approved it again, all of a sudden projects became attractive, and developers became attractive to investors," Prabhu said.

What Prabhu finds interesting is that a very large investor, Goldman Sachs, was involved in Indian wind developer ReNew Power’s raising of $135 million. “Big investors are basically just looking at where the opportunities lie right now,” he said. “It’s a fragmented industry, especially in India where investors are putting money into these companies and will probably acquire smaller developers and projects and get them to where they can take advantage of size and scale. We’re seeing very specific strategies like this, but it’s also very interesting that this amount of money has gone into wind.”

Wind tends to attract relatively little private equity funding because it’s such a mature industry, Prabhu explained. “Unlike solar, there aren’t a lot of startups with new technologies getting funded; most of the technology development at this stage is big developers doing it in-house,” he said. But technology funding does happen, he said, such as Q2’s ca. $6.2 million raised by ROMO Wind – indicating that “innovation is still happening.”

Mercom has also seen a shift in investor confidence in the wind sector, with significant growth in investment from funds that look for steady, dependable returns; as the sector matures, wind is increasingly seen as a comfortable and safe long-term investment. “The risk factor we used to see in the past with renewable energy, especially wind, has kind of gone away,” Prabhu said. “Investors are now so comfortable with the technology and economics that they’re willing to wheel and deal in these big projects.”

Among the large investors in the wind sector, Mercom has seen general funds, infrastructure funds, insurance companies and pension funds. Of these, Prabhu pointed to pension funds’ investment in wind and solar as an endorsement for the sector: “Pension funds don’t take much risk,” he said; “they think this is risk-free, mainstream investment.”

The largest group acquiring projects in Q2 were investment funds, followed by project developers and independent power producers (IPPs). “These funds are financial institutions buying these assets basically for returns, not another wind company buying a project from a peer. So that says a lot as to how far wind has come investment-wise,” Prabhu said. “It’s pretty close to being mainstream. And it's also a pretty good sign when utilities start acquiring projects."

In addition to VC funding, Q2 featured the highest number of project acquisitions since Mercom began tracking the wind sector, with 36 deals totaling almost $2.1 billion. The previous record quarter for project acquisitions was 24 deals in 2011, Prabhu said. There have been 53 project acquisitions so far this year, compared to 72 in the whole of 2012.

“Looking at some of the largest deals in terms of dollars,” he said, “there was the [U.S.] Puget Sound energy project from PG&E at almost half a billion. In terms of megawatts the largest was almost 400 MW. These are not small deals – these are huge.”

Looking forward, investors are watching various markets for policy changes. “There are markets where new wind installations are outpacing any other forms of energy, even conventional energy,” Prabhu said. But, he cautioned, “in India, with the elections coming up, investors will want to see when the GBI will actually be approved. In the U.S. they'll want to see how the Production Tax Credit develops, and they’re watching what happens in China.”  

Lead image: windmills at Thar desert in Rajasthan, India via Shutterstock

Untitled Document

RELATED ARTICLES

Fresh blow for wind power in Australia

Diarmaid Williams

Another blow has been dealt to the wind power industry in Australia with the news that a Senate committee has advocated new limits to the subsidization of the technology.

World Moves Toward 100 Percent Renewable Energy – First Electricity, Then Heating/Cooling, and Finally Transportation

Junko Movellan, Correspondent The exclusive use of energy from renewable resources in at least one sector has now become a feasible goal for 8 countries. Diane Moss, Founding Director of Renewables 100 Policy Institute, discussed this remarkable develop...

How Wind Turbines are Becoming Photocopiers – and the Cost to Investors

Guy Auger, Greensolver We all know that the wind turbine market in Europe is an oligopoly. Power resides in the hands of very few players — and, in the offshore space, just five manufacturers (OEMs) account for 100 percent of the turbines that we...

Siemens receives onshore wind orders for UK and Ireland

Diarmaid Williams

Siemens Wind Power and Renewables Division has been awarded orders, which when in place, will be capable of delivering power to over 100,000 households across Britain and Ireland.

Tildy Bayar is a journalist focusing on the energy sector. She is a former Associate Editor on RenewableEnergyWorld.com and Renewable Energy World magazine.

CURRENT MAGAZINE ISSUE

Volume 18, Issue 4
1507REW_C11

STAY CONNECTED

To register for our free
e-Newsletters, subscribe today:

SOCIAL ACTIVITY

Tweet the Editors! @megcichon @jennrunyon

FEATURED PARTNERS



EVENTS

Doing Business in South Africa – in partnership with GWEC, the Glob...

Wind Energy in South Africa has been expanding dramatically, growing fro...

2015 AREDAY Summit

The 12th Annual AREDAY Summit, August 8-13th in Snowmass Colorado. Engag...

StartUp Green

AREI, American Renewable Energy Institute, in partnership with ...

COMPANY BLOGS

Clean Energy Patents Maintain High Levels in First Quarter, Solar L...

U.S. patents for Clean Energy technologies from the first quarter of 201...

Fact Check: AWEA represents American wind power

The American Wind Energy Association (AWEA) is proud of its members for ...

Koch Professor drops his Koch title, still makes same errors plus s...

The Koch Professor’s title isn’t the only thing that’s...

NEWSLETTERS

Renewable Energy: Subscribe Now

Solar Energy: Subscribe Now

Wind Energy: Subscribe Now

Geothermal Energy: Subscribe Now

Bioenergy: Subscribe Now  

 

FEATURED PARTNERS