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IDFC PE set to buy BP wind power assets for Rs 650 cr

IDFC Private Equity, the country’s largest infrastructure-focused PE fund, is buying out energy giant BP’s wind power assets in India for Rs 650 crore, signalling the latter’s exit from India’s wind power business and underscoring its renewed focus on the US market, a person close to the development said.

IDFC Private Equity, which is bullish on clean technology and has dedicated Rs 1,000 crore for this, will buy the entire wind power portfolio of BP in India. BP has 40 mw assets in Maharashtra and 60 mw assets in Karnataka. The fund will make the payment for BP assets in two tranches, with the first worth Rs 350 crore. This acquisition will give the PE player a foothold in the wind power space.

IDFC Private Equity declined to comment on the deal while Anshul Mathur, a spokesman for BP India, said in an email response, “The focus of BP’s wind energy business is in the US, where it has an opportunity to develop a portfolio of 20,000 mw. In India, we are not exploring any new wind development options and are in the process of reviewing existing development positions. There are many potential options for the Indian wind business, one of which includes divestment.” He, however, declined to comment on the transaction with IDFC Private Equity.

BP has of late been focusing on the US, which last year overtook Germany to become the largest market in terms of power generation capacity with 25.2 gigawatts. The company has a total installed capacity of 122 gigawatts. BP showed 30% growth in power generation capacity globally in 2008, with 50% growth in the US.

India ranks fifth in the world with 10 gigawatts of installed capacity. According to official estimates, the country’s total wind energy potential is to the tune of 48 gigawatts.

Indian companies have mainly used wind power business as a tax service device. A 100% accelerated depreciation, which is now reduced to 80%, in the first year has been the key driver of wind power business in a decade and a half. This leads to enhanced cashflow for a firm setting up a wind energy plant while limiting the tax outgo for the firm. The wind energy plant on average incurs an investment of Rs 5.5 crore per megawatt, compared to Rs 4 crore for a thermal plant and Rs 5 crore for a hydropower plant. Experts say a wind power project could become unviable in India without tax benefit.

Source: Economic Times

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