Japan-based financial services company Orix Corporation is reportedly planning to acquire a 100% stake in a wind energy investment is already has in India.
Orix is reported to have been pursuing acquisition of 51% stake IL&FS Wind Energy, a subsidiary of the financially troubled IL&FS Group in India. Orix already holds a 49% stake in IL&FS Wind Energy and is reportedly looking to execute its right to buy out the remaining stake in the company.
The possible decision by Orix may not be a true indicator of the company’s view of India’s renewable energy, or more specifically the wind energy sector. Most, if not all of the IL&FS Wind Energy projects would be tied-up in power purchase agreements with state power distribution utilities under feed-in tariff regime. This means that the revenue from these projects would be much higher compared to the projects under the auction regime.
The IL&FS Group is reeling under tremendous financial strain and has defaulted on debt obligations worth US$540 million. The Group is now in the process of selling off its assets in order to repay its debt. Bids for the 874 megawatt wind energy assets had already been called by the Group.
A government-owned natural gas transmission and distribution utility, GAIL (India), had reportedly submitted a bid worth US$680 million, inclusive of the company’s debt obligations. Orix has now exercised its right to match the highest financial bid.
Despite the recent spike in interest from Indian as well as foreign investors in India renewable energy businesses the current atmosphere is far from being positive for these companies. Large-scale solar and wind energy tenders at the central as well as state level are being undersubscribed one after the other. Even the established and leading project developers are avoiding large bids in these tenders. The direct impact of this hesitation is already visible in the sharp decline in rate of capacity addition.
India managed to add just 55% of the target renewable energy capacity in 2018-19. Against a target of 15.6 gigawatts, only 8.5-gigawatt capacity was added during the 12 months of April 2018 to March 2019.
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