Generating attractive returns?

Private equity investments in hydro-electric plants in Himachal Pradesh are highlighting the appeal of small-scale power projects

Shantanu Surpure reports

In October last year, a US-based private equity fund poured US$25 million into two small hydro-electric power projects (SHPs) in Himachal Pradesh. The deal was the latest in a string of similar transactions which signals a move by power-sector investors away from the mega-projects of yesteryear towards smaller, more environmentally sustainable opportunities.

The private equity investor, which cannot be named for confidentiality reasons, acquired a 49% stake in two Indian companies, each of which holds a licence to generate electricity in the state. The shares were acquired by a Mauritius-based special purpose vehicle, itself a wholly owned subsidiary of a holding company in Delaware, which had been incorporated by the private equity investor specifically for the transaction.

Differential and affirmative voting rights were employed in the Indian entities’ shareholder agreements in order to provide the private equity investor with a high degree of control. The investor also took a majority of seats on the boards of both Indian investee companies.

Shantanu Surpure is the managing attorney of Sand Hill Counsel. The firm has offices in Mumbai and Silicon Valley and specializes in venture capital and private equity. This article was written with assistance from the firm’s associates Nischal Reddy and Nisha Mallik.