News Column

Global VC Funding in Wind Energy Triples in Q3

Oct. 30, 2012

Arundhati Ramanathan, Mint, New Delhi

wind turbines

Global venture capital (VC) funding in wind energy companies tripled in the 2012 third quarter since the preceding three months, while mergers and acquisitions (M&As) fell 43%.

Mercom Capital Group Llc., a global clean energy communications and consulting firm, said in a report released Monday that VC funding in the sector increased from $17 million (around Rs 91.46 crores today) in three deals between April and June to $57 million in six deals in the next three months.

Of this, $21.5 million was raised by Ireland-based Mainstream Renewable Power and $15.3 million by Chennai-based Trishe Developers, a wind power infrastructure development company.

Trishe also acquired National Wind, a US-based wind project developer. Overall M&A activity in the third-quarter fell to $53 million in 11 transactions from $93 million in five transactions in the second quarter.

Experts expect funding and M&A activity in wind energy companies to slow in the coming quarters because of uncertainties in global policies.

"Installations in China are plagued by grid connectivity issues as newly installed wind capacity is having a tough time getting connected to the grid while the upcoming expiration of production tax credits at the end of 2012 is a significant threat to the US market, especially if the Republican party wins the upcoming elections," said Raj Prabhu, managing partner, Mercom Capital. "In Europe, Germany is also facing grid connectivity and stability issues causing delays."

In India, the primary driver of the wind sector -- the accelerated depreciation programme that allowed turbine makers to write off investments sooner -- expired in April.

"India has consistently been among the top five wind energy producers in the world and unless the government acts quickly to announce new incentive programmes, new capacity addition will suffer," Prabhu said.

But he also said that a $20 million investment to be made by International Finance Corp. (IFC) in the Nereus India Alternative Energy Fund, the country's first dedicated renewable energy fund, will provide growth capital to small and medium companies in the domestic renewable and clean energy sector.

"IFC's proposed investment is a positive sign and shows that there is incredible potential for clean energy in India and investors like IFC recognize it," said Prabhu.

Large-scale project funding in the third quarter in the overall clean energy sector totaled $1.1 billion in 11 deals, all going to onshore projects, the report said. The top project funding deal was the $350 million raised by Nareva Renouvelables and Kharabel FZE for its 300 MW Tarfaya Wind Project in Morocco. NuPower Renewables raised $141 million for its 150 MW wind power project in Tamil Nadu.

The third quarter also saw four debt funding deals worth $359 million, including $281 million raised by Suzlon Energy Ltd in short-term loans to repay holders of foreign convertible bonds.

Source: (c)2012 the Mint (New Delhi) Distributed by MCT Information Services

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