Shriram Group's renewable arm to invest Rs 700 cr in wind power

To raise funds through debt and by diluting stake in subsidiaries

Orient Green Power Ltd, the renewable energy arm of Shriram Group, is planning to invest Rs 600-700 crore to set up new wind energy projects. The company is already in the process of setting up projects worth Rs 250 crore.

The company aims to become the country's largest renewable energy company with focus on wind energy and biomass with a capacity of around 1,000 Mw over the next few years, T Shivaraman, vice-chairman, OGPL, told Business Standard. Setting up one megawatt of wind energy capacity would cost Rs 6.5-7 crore, he added.

The company will fund the projects through structured equity and debt. “We will not be able to dilute in the listed company (Orient Green), so will look at diluting stakes in subsidiaries.”

Private equity fund Olympus Capital Holdings Asia and and US-based venture capital  Bessemer Ventures Partners have invested in the company.

Orient Green has tied up external commercial borrowings (ECBs) of $50 million, which would reduce the cost of borrowing and is pursuing refinancing/securitisation of receivables in respect of the the entire loan of about Rs 300 crore.

Recently, the company went through a restructuring operation after which Shriram Industrial Holdings Ltd (SIHL) infused Rs 150 crore by way of preferential issue in the equity share capital of the company. “This reinforces the strong commitment of the Shriram Group towards supporting and growing the renewable energy business,” said the company.

Orient Green’s plan is to have a capacity of 600.6 Mw, including 494.6 Mw of wind and 106 Mw of biomass power, before the 2014 season. Till August 2013, the company had a capacity of 466.5 Mw, including 406 Mw of wind and 60.5 Mw of biomass, according to recent the investors’ presentation.

The company is planning to add 170 Mw in the next two-three years Most of these projects will come up in the states of Andhra Pradesh, Maharashtra and Madhya Pradesh.

The company, which has large number of assets in Tamil Nadu, decided to look at other states due to poor grid connectivity in the state. “We already have a land bank in Tamil Nadu, in which we can set up wind energy projects to the tune of 150 Mw,” said Shivaraman.

While wind energy in the state is good, the grid connectivity has been the major issue. The good news is the State Electricity Board is addressing this challenge by creating new connectivity infrastructure, he noted.

As the grid infrastructure is expected to improve significantly in Tamil Nady after the next two years, the company also expects plant load factors to increase from 2015-16 onwards.