Building Profitable Solar Portfolios: The Successful Strategy of Solar Developers in India
“In the world of solar project development, securing long-term PPAs, minimizing costs, and ensuring optimal project performance are crucial for maximizing profitability. With the right exit strategy, developers can turn their hard work and investment into a profitable venture.”
Solar developers in India have been able to create a profitable business model by developing solar power projects and then exiting through portfolio sales. This strategy has become increasingly popular in recent years, and some of the industry’s biggest players, such as Avaada Energy and Welspun Energy, have successfully implemented this approach.
Portfolio sales involve developers building up a portfolio of solar power projects and then selling them to investors looking to acquire operating assets. This strategy is similar to the real estate industry, where institutional funds have a minimum check size to do a transaction. Developers will need to build up a portfolio of at least 1 GW of project assets before they can go for portfolio sale and hopefully make even more money.
Avaada Energy is a prime example of a company that has successfully executed the portfolio sale strategy. Led by CEO Vineet Mittal, Avaada Energy has built a portfolio of over 2 GW of solar power projects across India. The company has secured long-term power purchase agreements (PPAs) with several state-owned utilities and private companies, ensuring a stable revenue stream for its projects.
Recently Brookfield acquired Avaada Energy’s renewable energy assets for $1 billion, allowing Avaada to exit the projects and profit from the sale. This deal marked a significant achievement for both companies, as Brookfield expanded its presence in the Indian renewable energy market, and Avaada increased its profitability through the sale.
Welspun Energy is another solar developer that successfully executed the portfolio sale strategy. In 2016, Tata Power Solar acquired Welspun Energy’s renewable energy portfolio for $1.4 billion, allowing Welspun Energy to exit the projects and profit from the sale. This deal was a significant exit for Welspun Energy and its co-founders and demonstrated the potential for solar developers to build a profitable business model through portfolio sales.
To execute the portfolio sale strategy, solar developers must first acquire solar PPAs from utilities or large commercial and industrial customers. Once the PPAs are secured, developers must execute the projects, ensuring optimal project performance and maintenance. This process can take several years, depending on the size and complexity of the projects.
After the projects are operational, developers can then sell their portfolio of projects to investors looking to acquire operating assets. This strategy is an attractive option for investors, as they can acquire a portfolio of operational assets with long-term PPAs and stable revenue streams.
In conclusion, the portfolio sale strategy has become a popular approach for solar developers in India to build a profitable business model. Companies like Avaada Energy and Welspun Energy have demonstrated the potential for success in executing this strategy, building portfolios of solar power projects, securing long-term PPAs, executing the projects, and then exiting through portfolio sales. With the increasing demand for renewable energy, the solar industry is expected to continue growing, and more investment and development opportunities will become available in the future.
Recent transactions in Indian solar market
| Deal | Company(ies) Involved | Location | Capacity | Value (USD) |
|---|---|---|---|---|
| Brookfield to invest in Avaada Energy’s assets | Brookfield Asset Management, Avaada Energy | India | 1.7 GW | $1 billion |
| Fortum and Actis sell 250 MW solar project | Fortum, Actis, O2 Power | India | 250 MW | $190 million |
| Sembcorp to acquire Vector Green Energy’s assets | Sembcorp Industries, Vector Green Energy | India | 583 MW | $612 million |
| ReNew Power acquires Ostro Energy’s portfolio | ReNew Power, Ostro Energy | India | 1.1 GW | $1.5 billion |
| O2 Power acquires solar power portfolio | O2 Power, AMP Solar, Eden Renewables | India | 320 MW | N/A |
| TotalEnergies to acquire majority stake in AGEL | TotalEnergies, Adani Green Energy | India | 2.35 GW | $2.5 billion |
Solar project development involves several stages, from pre-development to commissioning, and ultimately asset sale. Developers aim to maximize profitability by securing long-term PPAs, minimizing costs, and ensuring optimal project performance. There are several exit strategies available to developers, including asset sales, mergers and acquisitions, and IPOs. With the increasing demand for renewable energy, the solar industry is expected to continue growing, and more investment and development opportunities will become available in the future.