Hero Future Energies to raise $250 million via fresh equity issuance

Hero Future Energies (HFE) will issue fresh equity of about $250 million to fund its renewable energy projects outside India. The company is in talks with leading global institutional financers to raise capital.

With this round of funding, HFE will become a $1-billion clean energy firm.

Confirming the funding plans, Rahul Munjal, chairman and managing director, HFE, told Business Standard this round of funding was for the firm to reach a 5-Gw target in three years.

HFE has 500 Mw under construction in India and 2 Gw overseas. It has a commissioned capacity of 1.5 Gw in India.

“We are in the market to raise capital and we will issue fresh equity. Our aim is to raise up to $250 million,” said Munjal. HFE, which is the clean energy arm of the B M Munjal group of companies, recently won its first set of solar and wind projects in Bangladesh, Ukraine, and Vietnam.

HFE has appointed HSBC for this transaction. The funding exercise is at the parent company level, which is headquartered in London. In 2019, HFE redesignated its UK unit to be the parent company, this paper reported.

Its India and Singapore subsidiaries are now holding companies (holdcos) for special purpose firms that run solar plants. It is the first Indian renewable energy company to shift base to another geography.

The move was aimed at exposing HFE Global to better financing avenues in the UK and the global market. At the same time, the company planned to use the UK’s trade treaties with several countries, especially in the African region, to expand its base there.

Munjal said: “Our projects in India give us scale but not enough risk-adjusted returns. For that, we find projects which are global. Most of the projects we have taken up outside India have dollar-linked returns so there is no forex risk. The global pipeline has come courtesy our presence in the London and Singapore unit.”

Denying plans to sell projects in India, Munjal said India would continue to be in focus. “But we have to do projects globally in order to honour returns. Margins will be under stress if we remain only in India. In megawatt terms we might not be the highest but in terms of profit percentage, we would be,” he said.

HFE, however, is selling a minority stake in one of its largest projects of 250 Mw in Rajasthan. “When we raise equity at the holdco level, the investor also gets a minority stake in the special purpose vehicles set up for our projects,” said Munjal.

HFE won a 250-Mw solar power project in 2018 at a tariff of Rs 2.53 per unit. In December 2019, it raised $65 million from the Asian Infrastructure Investment Bank for this project. In November, Abu Dhabi Future Energy Company (Masdar) invested $150 million in HFE. This was followed by another round of strategic investment by the International Finance Corporation (IFC), which pumped in $90 million in HFE.

IFC had earlier invested $125 million in HFE back in 2017.