IDFC Project Equity, which manages the Indian Infrastructure Fund, is investing $78.5 million or Rs 350 crore in the Indian subsidiary of London’s Alternative Investment Market-listed wind energy firm Caparo Energy. The company is aiming to build a portfolio of wind farms with an installed capacity of up to 5,000 MW by 2017. The investment in the wholly owned unit Caparo Energy (India) Ltd has been done through mezzanine finance, which will not lead to equity dilution.
Caparo has said that it is in talks to raise another $33.5 million on similar terms, upon which it will have sufficient funds for the development of approximately 700 MW of wind projects.
“With India’s continued power deficit and the increased price of coal, wind power is rapidly becoming a cost-effective and mainstream source of power, and Caparo Energy is well-positioned to lead this transformation taking place in the Indian power infrastructure,” said Ravi Kailas, CEO of Caparo Energy.
While the term of the first tranche of preference shares is six years (after which they can be converted), Caparo Energy expects to repay these within three to five years, through internal cash flows, issue of senior debt instruments, bonds or other debt refinancing. Caparo Energy was listed on AIM in October last year, raising £50.2 million (around Rs 370 crore). Its investors include Henderson Global (9.99 per cent), BlackRock (5.31 per cent) and Eton Park International (3.33 per cent).
Caparo Energy India had entered into a deal with Suzlon Energy for 1,000 MW of wind power projects, of which 500 MW are expected to be commissioned by March, 2012, and the remaining by March, 2013. The total value of the 1,000 MW order was at Rs 5,700 crore ($1.24 billion). The initial projects, totalling 100.8 MW, are coming up in Rajasthan, Gujarat and Maharashtra.
Among these, Caparo is developing a 42 MW project in Rajasthan, which is expected to be fully connected to the grid by mid-July this year. Caparo has also entered into a 20-year Power Purchase Agreement (PPA) with the Rajasthan State Electricity Board for the sale of power from this site. The company also has a 25.2 MW project in Gujarat, to be completed by July this year and a 33.6 MW project in Maharashtra, to be finished by December, 2011.
Another 750 MW consists of five individual projects located in Gujarat (300 MW), Andhra Pradesh (100 MW), Maharashtra (100 MW), Rajasthan (75 MW), Karnataka (100 MW) and Tamil Nadu (75 MW). Caparo still has to reach an agreement with Suzlon for the remaining 150 MW. In addition, the company also has an agreement with Gamesa Wind Turbines to develop sites worth 150 MW.
IDFC Project Equity, which manages $927 million India Infra Fund, has invested in power generation firms like Essar Power, Adhunik Power and GMR Kamalanga, although this will be its first investment in renewable energy. It has also invested in road projects of Ashoka Buildcon and Gayatri Projects, besides solid waste management firm Hanjer Biotech.