USAID commits to Indian energy fund

As John Kerry visits India, the government agency has launched a programme with Northern Lights Capital that secures a total of $140m for Mumbai-based Nereus Capital.

The US Agency for International Development (USAID) has launched a loan guarantee programme to support renewable energy private equity fund Nereus Capital in India, according to a statement from the US embassy in New Delhi. 

USAID is providing a $40 million credit guarantee to Northern Lights Development Opportunity, a special purpose vehicle launched by US multi-asset manager Northern Lights Capital Group, in order to invest in the Nereus India Alternative Energy Fund. 

On the back of USAID’s commitment, Northern Lights has agreed to commit an additional $100 million in equity to the India-focused clean energy fund.

The $100 million will be considered a typical limited partner subscription, taking the firm closer to its $250 million target, Jonathan Winer, managing director of Nereus, told Private Equity International. However, he declined to comment further on the progress of the fund or any new investments. In August last year, Nereus also received a $25 million commitment from the International Finance Corporation, PEI reported earlier. 

The real challenge, however, is how foreign direct investors can best access the strong risk-adjusted returns offered by these projects.

Jonathan Winer, managing director, Nereus Capital

Winer said clean energy can produce good returns for private equity investors in India due to a persistent power deficit, high electricity costs, and difficulties in the traditional thermal power sector. 

He added, “The real challenge, however, is how foreign direct investors can best access the strong risk-adjusted returns offered by these projects. We continue to believe that dedicated financial sponsors with large operating teams can best mitigate the risks associated with infrastructure investing in India.” 

The commitment comes as US secretary of state John Kerry and USAID administrator Raj Shah visit India to discuss the US-India strategic partnership. In a speech on 23 June, Kerry emphasised the importance of clean energy investment in the country,as well as its commitment to Nereus. He also said USAID is launching a new effort to enhance the efficiency of India’s air conditioners, a rapidly growing source of greenhouse gases.

“India can join China and the United States and other major economies in order to rapidly develop joint technology and pilot programs for low- or no-carbon strategies, which are essential. In addition to that, we need to and we can provide support to the entrepreneurs who have the most creative ideas,” Kerry commented. 

India can join China and the United States and other major economies in order to rapidly develop joint technology and pilot programmes for low- or no-carbon strategies, which are essential.

John Kerry, US secretary of state, speaking in New Delhi in June 2013

The commitment isn’t the US government’s first to clean energy in Asia. In 2012, US government agency the Overseas Private Investment Corporation (OPIC) committed $100 million to the South Asia Clean Energy Fund, which is managed by US-headquartered Global Environment Fund

The fund had an India sub-section, which would invest in projects alongside the Indian Infrastructure Development Finance Company (IDFC) and other local investors. OPIC said at the time it had more than $280 million-worth of potential investments in Indian clean energy and energy efficiency projects. 

Clean energy in India has attracted a number of private equity investors recently. In June, the private equity arm of Goldman Sachs invested $135 million in ReNew Wind Power, a renewable energy firm in India, PEI reported earlier. The capital injection was an add-on to Goldman’s original $250 million investment in the firm in September 2011.