State-run NTPC will float an initial public offer (IPO) for NTPC Green Energy (NGEL) in FY24 after talks with three entities for a strategic investment in the green energy arm failed to materialise.

The country’s largest power generator, with an installed capacity of 71.6 gigawatts (GW), was in talks with three investors, including Malaysian State-run oil and gas major Petroliam Nasional Berhad or Petronas, sources said.

“Only Petronas reached the final stage. But discussions remained inconclusive over valuation and investment. Petronas was interested in investing around $500 million for a 20 per cent stake, while NTPC wanted a better valuation. So, it backed out,” sources said.

NGEL’s IPO in FY24 will aim to divest up to 25 per cent share as per the capital market norms. At present, NGEL has an installed capacity of around 3 GW, while 5 GW is under construction and another 10-11 GW is in the planning stage.

A back of the envelope calculation suggests that NGEL will require around ₹40,000-50,000 crore for projects under planning considering a normative cost of ₹ 4-4.5 crore per megawatt (MW) for solar.

NTPC declined to comment on the matter.

Waning investor interest

Another issue in raising investments for domestic renewable energy projects is the lack of interest from foreign investors who are eyeing the US and Europe markets, who have launched their own green energy subsidy policies.

The official explained that foreign investors’ interest “waned” in the last few months after the launch of two major green energy subsidy policies. The EU rolled out the REPowerEU plan, while the US launched the Inflation Reduction Act (IRA).

“For instance, the IRA allocates around $370 billion in new spending and tax credits and addresses all main energy demand sectors, which has led to many investors eyeing the US’ RE sector compared to Asia. This is a concern,” the official added.

A top government official said that India is already evaluating the IRA and is exploring possibilities of exporting green energy products to the US. The government has launched a study to explore sectors that will benefit from the IRA and to create a list of products where India can seek favourable treatment.

Besides, domestic solar module manufacturers have been facing duty barriers in importing products. To check this, last month, the Ministry of New and Renewable Energy (MNRE) decided to keep the Approved List of Models and Manufacturers (ALMM) for solar photovoltaic (PV) modules in abeyance for FY24. It will provide a breather to manufacturers, as solar modules can now be imported till April 2024 without restrictions.

Another issue facing domestic manufacturers is rising interest rates.