Hero Future Energies gets $450 million from KKR and Parent

Global investment and private equity firm KKR (Kohlberg Kravis Roberts) and the Hero Group have decided to invest close to $450 million in Hero Future Energies (HFE). That translates into approximately Rs3,590 crore in rupee terms. Hero Future Energies is the renewable energy arm of the Hero group and that is the business that has been attracting a lot of attention from the private equity funds in the recent past. However, the break up of how much KKR would invest in Hero Future Energies (HFE) and how much the parent of the Hero group would invest has not been disclosed while announcing the deal.

Green energy is a capital intensive business and needs billions of dollars of long term commitment. This investment of $450 million will position Hero Future Energies (HFE) for continued growth into the future as also it would support the efforts of Hero Future Energies (HFE) to expand its renewable energy capacity. Green energy companies also need to be flexible and expand their capabilities across technologies such as solar, wind, battery storage and even green hydrogen. In addition, expanding and exploring new markets is always work in progress for green energy companies and it is heavily money consuming.

Both KKR and Hero group also have their own agenda in investing into Hero Future Energies (HFE). They need to urgently reduce the carbon footprint in their portfolio and that is becoming an urgent need for these companies. In terms of its product and project focus, Hero Future Energies (HFE) will look to support companies in their efforts to decarbonise their existing portfolios and also to transition towards sustainable energy sources. Most companies have set 2035 to 2040 as the target year to go totally carbon neutral.

Hero Future Energies (HFE) was founded in 2012 as an independent power producer (IPP) in India, with a focus on renewable sources of energy. Hero Future Energies (HFE) has a diversified portfolio of 1.6 GW (gigawatts) of operating solar and wind projects currently available as part of its portfolio. There is also a valuation perspective to such activities. Companies like NTPC and Tata Power have discovered that it is the renewable energy franchise that actually is the value driver for the group. This has led most of the large business groups in India, including Hero group, to adopt this kind of proactive model.

For Hero Future Energies (HFE), the partnership with KKR would allow them to work closely with a global high quality investor that is extremely conscious about the environment and the need to get carbon neutral. KKR will invest in Hero Future Energies (HFE) from its Asia Pacific Infrastructure Fund, which essentially is focused on such alternative energy properties. The cooperation will allow the Hero Future Energies (HFE) management team and existing investors like the parent Hero Group and IFC (International Finance Corporation) to jointly catalyse the next phase of growth for the company.

As Rahul Munjal, chairman & managing director of Hero Future Energies aptly put it; the company already has a deep commitment to the protection of the environment and its sustenance. Hence this investment would surely work to accelerate India’s energy transition. For KKR, the PE Fund has already committed close to $15 billion to renewable assets across the world and India has been one of its key focus markets. KKR has funded close to 23 GW of operational power general capacity in the renewable space and is still hungry for more. This HFE investment could be a sign of more such investments to come.