Nereus Capital’s India Alternative Energy Fund has received a fresh $100 million commitment from overseas limited partners (LP) for its maiden fund targeting $250 million.
The investment comes from US-based Northern Lights Capital Group and US Agency for International Development (USAID), which will provide a 40 per cent ($40 million) credit guarantee for a $100 million limited partner commitment. This LP commitment is expected to be managed by Northern Lights, which invests in boutique investment managers.
Nereus India Alternative Energy Fund will target companies engaged in the development, construction and operation of renewable and clean energy generation assets or those focussed on the deployment of clean energy technologies in India.
Last year, the fund closed a $20 million commitment from International Finance Corporation, the investment arm of World Bank.
The latest commitment comes at a time when fundraising has become challenging, especially for new general partners (GPs), on the back of macro issues like slowing economy and weakening currency besides a general lack of exits from India.
“Over the last several years, there have been challenges with respect to fund formation for private equity as an asset class in India. But even in this difficult fundraising environment, teams with proven track records and differentiated investment strategies can still attract capital. This is particularly true of financial sponsors who can improve the risk return profile of their underlying investment portfolio,” said Jonathan Winer, founder of Nereus Capital. Winer was earlier a founding member and director of DE Shaw’s principal investment group in India.
Nereus Capital is looking to invest in independent power producers (IPPs) in segments such as wind, hydro, biomass and solar besides waste-to-power and energy efficiency firms. It will also build a portfolio of 7-10 investments of $15-35 million each.
While it declined to comment on its portfolio, Nereus Capital has made an investment in an unnamed company developing a waste-heat recovery power plant. The focus of the firm will be on smaller projects which typically find it hard to get financing.
There have been several large private equity deals in the renewable energy segment this year—Singapore’s GIC invested $150 million in Greenko Group plc; Goldman Sachs pumped in another $135 million ReNew Power and NSL Renewable Power raised $90 million from development finance institutions like DEG, Proparco and ADB.
“While mid- to large-sized independent power producers have been able to access international institutional capital, the best returns are often from niche projects which can only be financed in a risk-mitigated manner by in-market financial sponsors with significant operating expertise,” Winer said.
(Edited by Joby Puthuparampil Johnson)