PE firms betting big on energy

The energy sector, especially power, has been witnessing a lot of interest from PE investors, said Arun Natarajan, chief executive officer (CEO), Venture Intelligence, a Chennai-based research service company focused on PE and venture capital activities.

Some of the big deals between January and May 2008 include Farallon Capital, L N Mittal India and Internet Ventures' investment of $395 million in Indiabulls Power Services in February 2008. In the Konaseema Gas deal in May this year, IDFC Private Equity and Lehman Brothers invested $125 million and in the KLG Power deal, TPG Growth put in about $50 million in April.

In the energy sector, renewable and power equipments are big attractions for PE investors, said Karthikeyan Ranganathan, Head, Investments, Baring Private Equity India. This fund is planning to invest $1 billion in India, of which a significant amount will go to the energy sector, he said.

Natarajan said the number of investments in the energy sector will grow manifold to bridge the demand-supply gap of energy in the country.

India needs to generate an additional 70,000 MW to meet its growing power requirements. Total investment required is $155 billion.

The Planning Commission expects private sector participation to increase by 25 per cent year-on-year.

In a recent report, KPMG Infrastructure Advisory Group had said that India needs to double its generation capacity (currently around 135 giga watt) by the year 2015. Enabled by the Electricity Act 2003, the Indian electricity sector is undergoing structural changes that aim to make it more competitive and bring back the interest of private sector in development and operation of power plants in India.