KKR Backed Virescent Infrastructure Floats India’s First Green Energy InvIT

• VRET is India’s first renewable energy InvIT proposed to be launched by Virescent Infrastructure, a renewable energy platform in India backed by KKR
• Virescent’s VRET aims to achieve approximately 1.5 GW of assets in the next 2-3 years
• CRISIL has assigned a provisional ‘AAA/Stable’ rating for the bank loan facilities of Virescent Renewable Energy Trust (VRET)

KKR backed Virescent Infrastructure has floated the first infrastructure investment trust (InvIT) in the green power space. The InvIT aims to achieve approximately 1.5 GW assets in the next two to three years.

The KKR arm has sought approval from the Securities and Exchange Board of India (SEBI) for the private InvIT. KKR is also in the process of acquiring a portfolio of operational solar assets of about 76 MWp (megawatt-peak) at different locations, including Mohaba (Uttar Pradesh), Jodhpur (Rajasthan), and Patan (Gujarat). The power purchase agreements (PPAs) for these assets are with state-owned counterparties. The assets will be vested in the InvIT

VRET’s initial portfolio will comprise of nine solar energy projects, with an aggregated capacity of approximately 400 MWp. The assets are located in [and service] Maharashtra, Tamil Nadu, Uttar Pradesh, Gujarat and Rajasthan. VRET aims to achieve approximately 1.5 GW of assets in the initial phase of its growth over the next two to three years. The portfolio will continue to be largely focused on solar energy assets – with solar assets estimated to comprise approximately 80% to 90% of VRET’s portfolio — and that are diversified in terms of location and participating counterparties.

The announcement follows the recent news from India’s Finance Minister, who announced as part of this year’s Budget plans to enact legislation to allow debt financing of InvITs by foreign portfolio investors (“FPIs”), in addition to various key initiatives. The provision demonstrates the government’s continued commitment to InvITs and REITs.

Sanjay Grewal, CEO of Virescent, said, “The provisional ‘AAA’ CRISIL rating for Virescent’s proposed InvIT opens up a variety of options for us to raise debt financing at competitive rates from various market avenues – including FPIs – to enhance our liquidity position. The ’AAA’ rating is reflective of the strong sponsorship of VRET by KKR, in addition to our prudent business strategy centred on building a diversified portfolio of approximately 1.5 GW over the next two to three years.”

Mr. Grewal added that InvITs worth Rs 2 trillion are expected to enter the market over the next five years, and Rs 80,000 crore of InvITs are in the pipeline for launch within a year. “The proposed InvIT of Virescent Infrastructure gives us a first-mover advantage to create new long-term and stable investment opportunities in India’s fast-growing renewable energy market.”