NEW DELHI, Oct 28: Innovative financing can help India achieve its renewable energy goals, according to a study by Institute for Energy Economics and Financial Analysis (IEEFA).
For India to reach its renewable energy goals, companies in the sector will need to fund capacity expansion with massive amounts of capital at competitive rates, IEEFA said in a statement.
A new report from the IEEFA looked at how this can be done by augmenting traditional financing structures and sources with other channels such as green bond issuances, asset monetisation and capital recycling initiatives.
The report examines in detail the positions and potential of three major players in India’s renewable energy sector, each with ambitious clean energy plans — NTPC, Adani Green Energy Ltd (AGEL) and Tata Power.
“The capacity expansion plans of NTPC, Tata Power and AGEL will require major financing drives to keep on track to meet renewable energy goals,” author of the report and IEEFA energy finance analyst Shantanu Srivastava said.
The report compares the capital structure changes of the three companies, explains how they have funded capacity expansion in the past and identifies trends that will shape the major industry players’ futures.
Overall, NTPC’s government parentage makes it easier to tap a diverse set of investors, but its predominantly thermal power asset base is increasingly a hindrance in global capital markets, according to the report.
Meanwhile, AGEL, the largest solar power company in the world, has capitalised exceptionally well on its green profile, evident from its high market capitalisation, asset monetisation and bond lending program.
Tata Power, to its credit, has been able to pare down debt, which improves debt raising capability in the future, but the company lacks patient global pension/corporate capital on its books, said Srivastava.
“A large proportion of India’s renewable energy capacity will be added by the largest players already operating in the industry, given the capital-intensive nature of the business,” he said.
With a target of 450 gigawatts (GW) of installed renewable capacity by 2030, India has one of the largest renewable energy expansion plans globally and it will require enormous sums of capital.
Meanwhile, there is a flood of global capital vying for opportunities to invest in zero-emissions infrastructure assets, driven in part by the rise of sustainable finance and environmental, social and governance (ESG) investing, it stated.
“India presents attractive prospects for these investors to deploy capital and gain exposure to the country’s growing renewable energy sector,” Srivastava said, adding “while also helping developers to secure low-cost capital from optimum sources.”
To accelerate the financing of capacity expansion and attract global capital on the most advantageous terms, Srivastava said, Indian companies should continue to leverage the breadth of funding avenues available to them.
According to the report, to secure global capital companies will need to take steps like adopting green/sustainability bond frameworks, enhancing credit ratings of projects, adopting globally recognised ESG frameworks and principles, ringfencing renewable assets and creating a robust investor outreach program.
For conventional utilities such as NTPC and Tata Power this will mean delivering on commitments not to build new coal plants beyond current pipelines.
AGEL will need to convince its parent Adani Group that aligning with the Paris Agreement is a prerequisite to accessing the widening pool of global investors eager to deploy capital into India’s energy transition, it added. (PTI)
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