A mix of policy uncertainty and slowing pipeline is forcing Indian project developers, suppliers and contractors to look for opportunities anew – inorganic expansion, looking at other business segments, new markets outside India or even diversification into other parts of the energy sector.
- Private sector players have scaled up hugely in anticipation of rapid year-on-year growth but if the market slows down permanently, there is a risk of many of them turning away to other opportunities;
- Many developers, suppliers and contractors are looking to shift focus to the rooftop solar and open access markets;
- Larger players are even looking to tap fast-growing emerging markets in the rest of Asia and Africa;
The Indian industry has scaled up significantly in expectation of rapid year-on-year growth based on the government targets. The most obvious way to deal with growth challenges now is to look for inorganic opportunities. Well-capitalized developers like Greenko, ReNew, Hero Future, Sprng, Hinduja and Macquarie have been actively scouting for acquisition opportunities. Valuation expectations of the sellers have soared but we still expect some significant closures for Ostro Energy (1,000 MW including under construction assets), Essel Infra (710 MW), Orange Power (600 MW) and SkyPower (350 MW) assets in the coming months. Some of the larger players are even looking at diversification into transmission and power distribution businesses.
Other recurring theme is to look at allied business opportunities in the private power sale market – both rooftop solar and open access. 2017 was a bumper year for both these markets – rooftop solar capacity addition grew by 44% to about 800 MW and open access by 190% to 644 MW. That is attracting attention from large scale IPPs, contractors and manufacturers including Tata Power, Mahindra, Sterling & Wilson, Hero, Azure, Trina, Shell and Engie. A notable example is Azure, which seems to be laying a lot of emphasis on the government rooftop solar market. It has been participating actively in these tenders and has so far, won more than 110 MW of new capacity. The company is now believed to be also focusing on the off-grid market particularly after launch of the SAUBHAGYA scheme for 100% electrification across India.
Other nascent and emerging international markets in Middle East, Africa and Southeast Asia are also attracting a lot of interest from Indian players. These markets are collectively expected to add over 11 GW of new solar utility scale capacity in 2018, up 67% over 2017. Sterling & Wilson is the pioneer here, having built up substantial EPC presence in countries such as South Africa, Saudi Arabia, UAE, Philippines and Vietnam. Both Amplus and CleanMax Solar have also set up offices abroad. Tata Power, Hero Future, Hindustan Power, Mahindra and Jakson are some of the other names believed to be actively looking at international business opportunities.
Over the last three years, India became a magnet for international investors and utilities as they entered the Indian RE market attracted by strong government commitment and clear growth roadmap. It is unfortunate that businesses are now forced to reconsider their investment plans and go abroad in search of greener pastures. The Indian government would need to act decisively to curb this trend.
