Investment Strategies in Developing Renewable Energy Assets: Unlocking Value and Maximizing Profits Through Exit Strategies
I
The renewable energy (RE) sector has experienced significant growth in recent years, with developers actively building their asset portfolios, optimizing operations, and employing exit strategies to maximize returns. In this blog post, we will discuss the investment strategies in developing RE assets, the portfolio development process, project development stages, and risk factors during project development, financing, and execution. We will also explore exit strategies and provide case studies of successful companies like Avaada Group, Acme Developers, Fortum, and Brookfield, to demonstrate how they have created value and profited from their solar asset portfolios.
The Portfolio Development Process
- Project Development Stages: a. Site Selection and Assessment b. Permitting and Regulatory Compliance c. Engineering, Procurement, and Construction (EPC) Contracting d. Financing and Investment
- Risk Factors during Project Development: a. Regulatory and Policy Risks b. Market and Off-taker Risks c. Technical and Performance Risks d. Financial and Credit Risks
- Arranging Financing: a. Debt Financing b. Equity Financing c. Government Incentives and Subsidies
When the solar assets become operational, and returns are stable, developers reach a risk-free stage, making it the ideal time to employ exit strategies. By divesting operational assets with stable returns, developers can unlock the value of their investments and maximize profits.
Case Studies
Avaada Group: Avaada has successfully developed, commissioned, and operated a diversified portfolio of solar projects. Their exit strategy involved selling operational assets, such as their 414 MW solar portfolio to Petronas, Malaysia’s state-owned oil company, in a deal worth around $200 million (https://mercomindia.com/petronas-indian-arm-acquires-solar-assets).
Acme Developers: Acme’s robust solar asset portfolio led to the acquisition of 404 MW of solar power plants by Actis-backed BluPine Energy (https://www.livemint.com/companies/news/actis-blupine-energy-buys-atha-group-s-404-mw-solar-power-assets-11669272831366.html). The exit strategy focused on selling operational projects with stable returns.
Fortum: Fortum has strategically developed and divested their solar assets, as seen in the sale of their 74% stake in a 250 MW solar project to Sembcorp Industries (https://www.pv-tech.org/sembcorp-industries-acquires-vector-green-energy/). This exit strategy allowed Fortum to unlock the value of their operational solar assets and reinvest in new projects.
ReNew Power: ReNew Power has successfully added over 700 MW of solar and wind assets to its portfolio, thereby attracting investments and acquisitions (https://www.livemint.com/companies/news/renew-power-adds-over-700-mw-of-solar-wind-assets-to-its-portfolio-11654171518889.html). Their exit strategy revolves around consolidating their market position and expanding their renewable energy portfolio.
Brookfield: Brookfield has aggressively pursued growth in the Indian renewable energy sector, with the acquisition of Emami Power (https://www.vccircle.com/brookfield-inks-deal-to-acquire-solar-energy-firm-emami-power) and talks to acquire CleanMax Solar (https://economictimes.indiatimes.com/industry/renewables/brookfield-in-talks-to-acquire-cleanmax-solar/articleshow/98781974.cms). Brookfield’s exit strategy focuses on building a strong renewable energy portfolio and divesting assets