Temasek, EQT back India renewable energy platform
Singapore’s Temasek Holdings and Sweden’s EQT will commit $500 million to the launch and development of O2 Power, a renewable energy platform in India.
Led by Parag Sharma, a former COO at ReNew Power - a renewable energy firm that counted Goldman Sachs as an investor - O2 Power will aim to produce more than 4 gigawatts (GW) of installed capacity from solar and wind energy projects in the coming years. It will establish greenfield projects and acquire existing capacity.
“India presents significant investment opportunities being the second-largest renewable energy market in the world and EQT is delighted about teaming up with Temasek and O2 Power. This is not only EQT Infrastructure’s first investment in India, it is also well in line with our ambitions to contribute to a cleaner future,” said Fabian Gröne, a partner at EQT, in a statement.
EQT's commitment will come from its latest infrastructure fund, which closed at EUR9.1 billion ($10 billion) in 2018.
As of December 2019, India sourced 85 GW from renewable energy sources. The government wants that figure to reach 175 GW by March 2022, with solar and wind energy expected to contribute 100 GW and 60 GW, respectively. Last year, Prime Minister Narendra Modi announced an ambition to double the target to 450 GW although there has been no official update to existing energy policy.
Challenges remain in solar energy production. Rating agency CRISIL outlined nearly a year ago that increased taxation, arbitrary bid cancellations, land availability have cast doubt on the 100 GW target. At the 2019 AVCJ Forum in Hong Kong, renewable energy investors said that short-term policy changes represent a key risk for such investments but they may be overestimated in emerging markets.
Other PE-backed renewable energy producers in India include Ayana Renewable Power, Sprng Energy, Avaada Energy and Greenko. In 2018, Temasek also contributed to the Indian government’s National Investment Infrastructure Fund.
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