Global private equity fund Actis LLP is exploring the sale of Ostro Energy Pvt. Ltd, a successful renewable energy company it owns, at a premium.
In February 2015, Actis committed $230 million to create renewable energy platform Ostro Energy in India to leverage the opportunities offered by the country’s emerging green economy.
Ostro Energy adopted an aggressive approach, becoming one of the firms that bid a record low wind energy tariff of Rs3.46 per kWh in a 1 gigawatt (GW) tender by state-run Solar Energy Corporation of India (SECI) in February to win a 250-megawatt (MW) project.
Encouraged by Ostro Energy’s success, Actis set up its second green energy platform in India, Solenergi Power Pvt. Ltd, which was among the successful bidders for the Rewa solar power project in Madhya Pradesh.
“The exit horizon for Actis’ earlier fund is approaching. They are timing an exit,” said a person aware of the development, requesting anonymity.
Actis invests exclusively in emerging markets with a focus on investments in energy and real estate. Its earlier energy fund, Actis Energy 3, raised $1.15 billion in 2013. Its fourth energy fund, Actis Energy 4 (AE4), raised $2.75 billion in commitments and will invest the funds in Latin America, Africa and Asia. Of the $7.8 billion deployed by Actis, 26% is in the energy sector.
“They (Actis) have started the process,” said another person who too spoke on condition of anonymity.
Actis’ aggressive bid approach is representative of a trend in India’s green energy space wherein overseas firms have led the race to the bottom for tariffs to secure contracts. India has witnessed record low solar and wind tariffs due to falling equipment prices and the lower cost of raising finances. The National Democratic Alliance government has set up an ambitious clean energy goal to generate 175 GW of renewable energy by 2022.
An Actis Llp spokesperson declined to comment.
This comes in the backdrop of Actis’s plans to invest around $500 million in Solenergi Power, with India’s demand for green energy expected to grow seven-fold in 2035, according to the latest BP Energy Outlook released in January.
Ostro Energy also plans to raise $250 million by selling bonds overseas, Mint reported on 31 March. It currently has 234MW of operational wind projects and 350MW of wind and solar capacity under construction. Ostro plans to build 1,000MW of renewable energy projects by 2019.
Ostro Energy and Solenergi are among the energy platforms that Actis has created globally, following Globeleq Mesoamerica Energy in Central America, Zuma Energia in Mexico, Aela Energia in Chile and Atlantic Energias Renovaveis in Brazil.