IDFC Alternatives, the asset management arm of infrastructure-focussed lender IDFC Ltd, is floating a platform to host its renewable energy investments, after the success of a similar roads platform.
The firm also has a plan to aggregate a power transmission platform for investments in the segment, although this is some time away, Aditya Aggarwal, partner–infrastructure at IDFC Alternatives, told VCCircle.
The PE firm expects to make its renewable energy platform operational in three months’ time, soon after the infrastructure fund closes a transaction currently in the works to acquire a 250MW asset, Aggarwal said.
For its platform, it would only consider scaled up, operating assets with existing cash flows, he said. The platform will have assets which can generate dividends for the firm within the first few years, he said.
Independent aggregation platforms offer better efficiency, enable the firm to take a controlling stake and provide easier exit options, he said.
The Mint newspaper first reported IDFC Alternatives’ plan to set up a renewable energy platform.
IDFC Alternatives joins another PE firm, Actis, in consolidating its renewable energy assets under one platform. In February 2015, Actis committed $230 million to set up Ostro Energy Pvt. Ltd.
According to Ostro’s website, Actis has now committed a total of $280 million for the platform. And earlier this year, Ostro secured debt funding worth around $177 million from International Finance Corporation, the World Bank’s private-sector arm.
Aggarwal also said that IDFC Alternatives, which still has $300 million to deploy from its second infrastructure fund, is targeting acquisitions of 250 MW of operating wind, solar and small hydro capacity by the end of 2016 and upwards of 600 MW over the next 18 months.
“Our sweet spot on our own (investment size) is anywhere from $100 million to $150 million but if there is a trade which is available anywhere in this space for $400-500 million, then we have additional capital available to us from our LPs (limited partners or investors) by way of co-investments,” said Aggrawal, who will head this platform.
Meanwhile, Ostro is targeting a bigger portfolio than IDFC Alternatives. According to Ostro’s website, it plans to build a portfolio of 1,000 MW of renewable energy projects by 2019 from 234 MW currently. This could include acquisitions, too.
Unlike IDFC Alternatives, however, Ostro plans to focus mainly on wind power projects, which make up its entire operational capacity. A top Actis executive had said last year that the PE firm might set up a separate platform if it planned to focus on solar projects.
IDFC Alternatives and Ostro are part of a growing list of companies that are planning to ramp up their renewable energy portfolios after the Indian government set a 175 gigawatt target for green energy capacity by 2022. This includes 100 GW of solar and 60 GW of wind power capacity. India's renewable energy capacity is currently around 44 GW.
Among the most significant deals in the sector, Tata Power Co. acquired Welspun’s renewable energy assets for $1.4 billion earlier this year.
Japan’s SoftBank Group Corp. is the most prominent foreign investor in India’s solar energy sector. SoftBank’s joint venture with Bharti Enterprises Ltd and Taiwan’s Foxconn Technology Group plans to invest $20 billion in India’s solar power sector.
*This article has been updated to include comments from IDFC executive.
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