The spiraling liquidity crunch and ‘bad loans’ problem in India has forced one of the companies to sell its wind energy assets.
Japanese financial company Orix has acquired a 51% stake in IL&FS Wind Energy Limited, a subsidiary of the troubled financial company Infrastructure Leasing & Financial Services Limited. With this acquisition, Orix now holds the entire 100% stake in IL&FS Wind Energy and gives it complete control over an operational capacity of 873 megawatts.
IL&FS Wind Energy owned the wind energy capacity through 7 special purpose vehicles in which Orix already had a 49% stake. According to earlier reports, government-owned gas utility GAIL had also expressed interest in the complete acquisition of IL&FS Wind Energy. GAIL is believed to have submitted a bid worth Rs 4,800 crore (US$670 million). However, as Orix was already an existing shareholder in the company and had the first right of refusal, which it successfully exercised.
IL&FS slipped into deep financial trouble and was dragged to India’s bankruptcy court by creditors after it failed to service its debt obligations. A subsidiary IL&FS Financial Services has loaned around US$2.63 billion to various companies with little to no hope of getting that back. The group company itself carries a debt of around US$14 billion and is now looking to monetize physicals assets, like power projects and land, to repay that debt.
In a statement, Orix stated that it has acquired the remaining stake in IL&FS Wind Energy due to the high growth potential available in the Indian market. The Indian government has set ambitious goals for wind as well as solar power in the coming decade which is the primary reason behind this transaction, the company noted.
Liquidity crunch and the inability to service debt is an epidemic spreading rapidly through the Indian economy with several companies operating at the brink of collapse. We covered the story of Suzlon Energy which is reportedly planning a stressed sale as well.
Within the renewable energy market, several well-placed companies and leaders in the sector are looking to raise funds by selling assets into a yieldco after scrapping plans to raise funds from the equity market.
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