Germany’s bilateral development finance institution DEG (Deutsche Investitions- und Entwicklungsgesellschaft), a member of KfW Bankengruppe, has provided €10 million (Rs 68 crore or $13.6 million) risk capital in the form of compulsory convertible debentures to solar power producer Azure Power India Pvt Ltd, the institution has disclosed in a statement today.

The proceeds will be used to implement Azure’s expansion plans over the next couple of years. The funding will also help enhance the capabilities of its 10 existing operating facilities, thus enabling it to emerge as a major player in the domestic solar power sector over the next 2-3 years.

In November 2008, Azure raised an undisclosed amount from Helion Venture Partners and Foundation Capital in series A funding. The company also received undisclosed funding from IFC in 2010.

Azure Power is an independent solar power producer and implements megawatt-scale, grid-connected solar photovoltaic power plants in India. The company chiefly caters to utilities, government and commercial customers. Currently, Azure operates a 2 MW unit in Punjab that meets the power requirements of about 32 villages and also runs another 10 MW unit in Gujarat. The company has offices in Delhi and Delaware (USA).

Azure is also planning an investment of 1,000 crore for an additional capacity of about 110 MW of solar power generation in Gujarat, Rajasthan and Karnataka.

Incidentally, one-third of India’s population lacks access to electricity while serious shortage of power supply (8-10 per cent base load) threatens the country’s economic growth. At the same time, renewable power (excluding large hydro projects) accounts for only 10.6 per cent of the country’s 25 installed capacities and for 3.5 per cent of the actual energy generation as of March 2011, the finance institution noted.

Since 1962, DEG, one of Europe’s largest development finance institutions, has been advising and financing private sector firms in developing nations. The institution provides them with long-term capital and hand-holds them across the project phases. Financing of sustainable and commercially viable renewable energy and clean-tech projects by private sector firms in developing countries is a strategic mission of DEG.

Private equity investments in renewable energy companies stood at $522 million across 14 transactions for the first three quarters of CY2011, according to VCCedge, financial research platform of VCCircle. This is a remarkable rise, compared to 7 deals worth $98 million in CY2010 and 8 deals worth $112 million in CY2009.

Solar energy is fast becoming a ‘sunrise’ sector in India and it has started attracting considerable interest from financial investors, as well as cross-border partnerships.

Most recently, solar projects developer SunBorne Energy has joined hands with Europe-based IPP Eoxis Energy for executing a 15 MW solar photovoltaic project being built in Gujarat.

In June this year, IFC invested $4 million in Sapphire Industrial Infrastructures Pvt Ltd, a subsidiary of Moser Baer Clean Energy Ltd. Sapphire Industrial is constructing a 5 MW solar plant at Sivaganga in Tamil Nadu.  

Last year, Gurgaon-based SunBorne Energy, a specialist in utility-scale solar solutions, entered into an agreement with Chinese solar panel maker Suntech Power Holdings Co., Ltd where Suntech would supply SunBorne Energy with 100 MW of solar modules over the next two years. The agreement includes an initial order for 10 MW of solar panels for a project in Gujarat.

Among other initiatives, the diversified Yash Birla Group is likely to sign a joint venture agreement with a US-based company to set up and maintain solar power plants in India.

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