The crisis affecting IL&FS, once the flagbearer of India’s PPP initiatives, contributed further to the decline in investor confidence in PPPs.

By Uday Khare

The last few years have seen a decline in public-private partnerships (PPP) in the infrastructure sector, and this trend continued in the previous year. The poor financial condition of many sponsors, the continuation of the NPA crisis, and the resultant lack of liquidity and appetite for banks to provide funding were amongst the contributing factors.

The crisis affecting IL&FS, once the flagbearer of India’s PPP initiatives, contributed further to the decline in investor confidence in PPPs. The situation is the bleakest for the thermal power sector, with many thermal power companies on the verge of insolvency. The 40th Standing Committee on Energy estimated that out of 90,000 MW of coal-based power capacity, approximately 60,000 MW is under stress, to which lenders have exposure of approximately Rs 3 lakh crore. State Bank of India managing director Dinesh Kumar Khara was quoted earlier this year as saying that banks “do not want to touch” the power sector anymore.

However, it was not all doom and gloom. In the budget for the FY 2018-19, the Finance Minister had proposed investment of up to $85.2 billion in creating and upgrading infrastructure. Twenty four PPP projects reached financial closure in the first half of 2018 in the electricity, ports, roads, water and sewage sectors, amounting to a total investment of $3779 million.

As in previous years, roads continue to be the most popular sector for PPPs, with the Kishangarh – Gulabpura stretch on NH-79 and Gagalheri – Saharanpur – Yamunanagar stretch of NH-73 reaching financial closure this year. The renewable power sector too had its moments, with all three developers of Rewa Solar Park in Madhya Pradesh reaching financial closure this year.

While roads and renewable energy were once again the most popular sectors for PPP projects, some other sectors appear to be gaining momentum. It was a busy year for the aviation sector, with second and third rounds of bidding for the Regional Connectivity Scheme announced, and the bidding process for Bhogapuram airport ongoing.

Most recently, tenders were launched for privatization of airports at Lucknow, Ahmedabad, Jaipur, Mangaluru, Thiruvananthapuram, and Guwahati. PPPs in Housing and Waste to Energy were other sectors which gained traction, with projects appearing in the pipeline.

This year also saw new models emerge. Once again, roads led the way, with National Highways Authority of India’s Toll-Operate-Transfer model, which dispenses with
construction and limited the concessionaire’s scope to toll collection and operation, successfully awarded this year. Airports Authority of India also attempted an operation and maintenance model for Ahmedabad and Jaipur airports, but these failed to generate enough interest.

The outlook for this year continues to appear uncertain, especially with the general elections around the corner, and resolution of stressed assets still ongoing.

Nevertheless, there is hope for new sectors and models to emerge.

(Uday Khare is a partner at Mumbai-based law firm Cyril Amarchand Mangaldas. Views are the author’s own)

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Adani Green Energy, Kodangal Solar Parks,  Karnataka, PPA tariff 

Adani Green Energy, Kodangal Solar Parks,  Karnataka, PPA tariff 

KSPPL has Power Purchase Agreement (PPA) with Bangalore Electricity Supply Company Ltd. The fixed PPA tariff is Rs 5.48/kWh for a period of 25 years.

Adani Green Energy (AGE) Saturday said it has acquired 51 per cent equity share capital of Kodangal Solar Parks Pvt Ltd (KSPPL) from FS India Devco Pvt Ltd for about Rs 1.69 crore. AGE already held 49 per cent stake in KSPPL. KSPPL was incorporated in August 2015 and has set up 20 MWac solar power project at Bagewadi, Karnataka, AGE said in a BSE filing. “KSPPL stake is acquired with an object of consolidating the company’s interest in KSPPL and within the overall objective of the company. With this acquisition, KSPPL has become wholly-owned subsidiary of the company,” it added.

Also read| 3 key areas that will drive growth in India’s logistics sector in 2019

KSPPL has Power Purchase Agreement (PPA) with Bangalore Electricity Supply Company Ltd. The fixed PPA tariff is Rs 5.48/kWh for a period of 25 years. The project was commissioned on January 6, 2018. “1,07,100 equity shares of Rs 10 each acquired at Rs 158.04 per shares as per valuation certificate,” the filing said.

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Global solar sector sees corporate funding, M&A activity worth USD 9.7 bn in 2018

The global solar sector witnessed a total corporate funding and merger and acquisitions activity worth USD 9.7 billion in 2018, a 24 per cent drop compared to the year-ago period, according to a report. Mercom Capital Group said the total M&A and global corporate fundings, including venture capital (VC), debt financing and public market financing stood at USD 9.7 billion, a 24 per cent drop compared with the USD 12.8 billion raised in 2017.

Global VC funding for the solar sector in 2018 fell 18 per cent to USD 1.3 billion in 65 deals, compared with USD 1.6 billion raised in 99 deals in 2017, the report said. Commenting on the decline in funding, Mercom Capital Group Chief Executive Officer Raj Prabhu said: “2018 was a year filled with uncertainties which started with Section 201 tariffs followed by an announcement from China that it was capping installations and reducing its feed-in-tariff.”

Besides, more bad news came from India which imposed safeguard duties on imports. Uncertainty stemming from the three largest solar markets in the world was reflected in equities of publicly-traded solar companies as well as fundraising activity during the year, he added.
Out of the USD 1.3 billion in VC funding raised in 65 deals in 2018, USD 1.2 billion went to 50 solar downstream companies, which comprised 91 per cent of the total VC funding in 2018.

The top solar VC-funded companies in 2018 were Cypress Creek Renewables which raised USD 200 million, GreenYellow with USD 174 million, followed by Amp Solar with USD 154 million, Wunder Capital with USD 112 million and Sunnova Energy with USD 100 million, the report said.

The top investors in large-scale projects included the European Bank for Reconstruction and Development (EBRD), which invested in 16 projects, followed by the Dutch development bank FMO with seven deals, and Natixis with six deals.

Merger and acquisition activity in the solar sector increased with 82 transactions in 2018 compared to 72 transactions in 2017. The largest and most notable transaction in 2018 was the USD 5 billion acquisition of Equis Energy by Global Infrastructure Partners (GIP) – through its Global Infrastructure Partners III Fund along with Canada’s Public Sector Pension Investment Board and CIC Capital.

“About 100 GW of large-scale projects have been acquired since 2010, a reflection of how far solar has come as an asset class. Quality solar projects are now a mature, attractive investment opportunity around the world, said Prabhu.

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