Blackstone-Backed Generator Plans Solar IPO

Hindustan Powerprojects Pvt., an Indian generator backed by Blackstone Group LP (BX:US), plans to sell shares in its solar unit as it prepares to double investment in photovoltaic projects to $2 billion by 2016. “It’s a sensible business to take out to market,” said Ratul Puri, chairman of the New Delhi-based developer of coal, solar and hydropower plants, formerly known as Moser Baer Projects Pvt. The unit has a pipeline of projects that will require $1 billion of investment within the next two years, he said, although the company has “no immediate need for cash.” 

Goldman Sachs Group Inc. (GS:US), UBS AG (UBSN) and Credit Suisse Group AG (CSGN) have been appointed managers to the initial public offering, according to two people familiar with the matter, who asked not to be named because the information isn’t public. Puri declined to comment on the bankers. 

Rising coal prices have pushed electricity rates in India up by 40 percent on average since 2010, making solar cheaper for commercial consumers in Delhi and Mumbai compared with electricity from the grid, according to Bloomberg New Energy Finance. India, which had virtually no solar power three years ago, plans to attract $11.7 billion of investment by 2017 into the industry to reduce costly fuel imports.It may still be “too early” for solar developers to go to market, said Madhavan Nampoothiri, founder of Chennai-based RESolve Energy Consultants, without specifically referring to Hindustan Powerprojects. “We need more good quality projects on the ground to give confidence about the performance of plants and the expected long-term returns.”

Blackstone Investment

New York-based Blackstone invested $300 million in New Delhi-based Moser Baer Projects Pvt. in August 2010. The world’s biggest buyout firm holds about 36 percent in the company, Puri said. The solar unit, which operates farms in India, the U.K., Italy and Germany, will be the first to list of the holding company’s four units that include hydropower, coal power and coal mining, he said in an interview in New Delhi.

“We already have the capacity to allow a listing,” with 350 megawatts of photovoltaic projects running, Puri said. “We also have to provide exit to our investors.” He declined to say how much the company expects to raise from the share sale. Solar power is perfect fit for India, Puri said. Generation from panels peaks when electricity demand surges during the subcontinent’s hot summer months and in the middle of the day as farmers switch on irrigation pumps. Farm pumps account for one-fifth of the power drawn on the nation’s grid, according to Tarun Kapoor, joint-secretary at the Ministry of New and Renewable Energy.

Speed of Installation

Another advantage is that photovoltaic projects can be built in as short a time as six weeks, Puri said, compared with over seven years for Hindustan Powerprojects’ 2,520-megawatt coal-powered project in Anuppur, Madhya Pradesh state, Solar will also become increasingly compelling for India as an energy source because it will reduce the cost of transmission and distribution by generating power close to where it can be consumed, he said. The cost of building capacity into the grid to handle peak-time generation from conventional sources raises the actual price of power by 12 times, Puri said.

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