Indian Power Producer Gets Another $140 Million in Funding

Indian wind-and-solar power producer ReNew Power Ventures Pvt. Ltd., has received an additional $140 million in funding, as investors bet that India's economic revival could spark demand for alternative energies. Expectations are running high that the power sector—and renewable energy, in particular—will grow on the back of rising demand and Prime Minister Narendra Modi's business-friendly policies, said Sanjay Chakrabarti, a partner for the Cleantech practice at Ernst & Young LLP. 

With this latest investment, ReNew hopes to double its clean-energy portfolio to 1000 megawatts by 2015. "We may need to raise further capital sometime in 2015," to reach this goal, said Sumant Sinha, chief executive of ReNew Power. He added that it is still too early to determine whether the source of that capital would be from public markets or private investors. 

The added funding from initial backer Goldman Sachs Group, GS +1.54% Inc., Asian Development Bank and GEF SACEF India, a fund managed by alternative-asset investment firm Global Environment Fund, will bring the total equity investment of the privately owned Indian firm to $390 million, a person familiar with the situation said Thursday. 

The Mumbai-based energy company received a $250 million equity investment from Goldman Sachs in 2011. It currently operates 460 megawatts of renewable-energy assets in five Indian states: Gujarat, Haryana, Karnataka, Maharashtra, and Rajasthan. The company also has a 500-megawatt project pipeline, which includes a 50-megawatt solar project in Madhya Pradesh. The rest of the pipeline is designated for wind projects. 

Power production in India has failed to keep up with the demands of its growing population. Last month, withering heat caused outages and triggered protests in New Delhi, a reminder to Mr. Modi of the staggering challenge his new administration has inherited. Nearly 300 million people in India have limited or no access to electricity, according to the World Bank.

Energy distribution is one problem. State-run and private energy distributors are laden with debt because of state-set prices that require political capital to change. Moreover, theft and rickety infrastructure causes nearly a third of electricity to get lost in distribution. These problems, coupled with existing environmental regulations, have discouraged plans for new plants and cinched supplies of traditional power sources, such as coal and gas.

Costly crude imports also add heft to a push toward alternative energy sources. India is the fourth-largest oil consumer in the world and imports nearly three-fourths of its crude requirement. 

India plans to double its renewable energy production to 30,000 megawatts by 2017, which will account for about 12% of India's total energy mix. In 2010, the country announced plans to increase its solar-power generating capacity nearly tenfold, to 20,000 megawatts by 2022. India has built up 2,500 megawatts so far.Blessed with a long coast line, India began developing its wind-energy capacity in the 1990s and currently has installed capacity of 21,136 megawatts. Wind power accounts for 8.5% of India's total installed power capacity, and generates 1.6% of the country's power. 

Mr. Modi's record on renewable energy in the western state of Gujarat, where he was chief minister for more than a decade, also is fueling expectations, said Ratul Puri, chairman of solar-power producer Hindustan Powerprojects Pvt. Ltd. in an interview. The firm, backed by private-equity firm Blackstone Group L.P., plans a public offering in the next few months. 

As chief minister, Mr. Modi made land available for solar projects and offered economic incentives for solar-power businesses. Gujarat now has India's biggest capacity for solar power.Experts also say Gujarat's wind-energy capacity has increased over the past six years, as part of a decade-and-a-half-long campaign by Modi's government to develop the alternative power. The state currently has installed wind-energy capacity of 3,093 megawatts.

Yet solar-power producers say they are hesitant to invest in more solar equipment, given a May 22 proposal by a wing of the commerce department to impose antidumping duties on overseas shipments. Equipment buyers are awaiting clarity on government policy, due on Aug. 22, before placing orders from the U.S., China, Taiwan and Malaysia. The Ministry of New and Renewable Energy has opposed the duties. 

The proposed antidumping duties, however, won't apply to wind-power equipment, which comprises the bulk of ReNew's power generation, said its chief executive, Mr. Sinha

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