Leading Indian renewable energy developers are facing a liquidity crunch due to the COVID 19-induced nationwide lockdown and increased competition from emerging players. The country’s debt-ridden discoms are unable to pay off their dues to the generating companies. This has resulted in sharp increase in the sale of operational assets from various large renewable energy generators in the past few months.
Even as economic activity has come to a standstill after extended lockdown, foreign investors are showing immense interest in the Indian renewable energy sector. This is due to the government’s announcements to implement various sectoral reforms including privatization of electricity distribution companies and stricter penalties on failure to comply with renewable purchase obligation targets.
Azure Power Looking To Sell Assets
The private equity firms KKR and Actis are in talks to acquire solar assets of 435 megawatts of capacity from Azure Power Global Limited. The deal is expected to be finalized at a cost of around $200-250 million.
Azure Power is looking to sell its operational solar assets, and the capital gained from the sale of assets will be used for the development of new and under-construction projects. Investment bank Avendus Capital has been appointed to run the stake sale process of the portfolio. Azure Power recently secured the rights to develop 4 gigawatts of solar power generation capacity and 1 gigawatt of solar module production facility in the largest solar power tender in the world.
Several other investors, such as Brookfield, Edelweiss, Ayana Renewable Power, and O2 Power also expressed interest in the deal, however the respective negotiations were not fruitful.
Both KKR and Actis are active private investors in the Indian renewable energy market. Earlier this year, KKR acquired 371 MW of solar assets of Shapoorji Pallonji Infra at $204 million and Actis acquired 600 MW of solar assets from Acme Cleantech Solutions.
Azure Power is the first Indian renewable energy company which has been listed on the US stock exchange. The company is backed by Canadian pension fund Caisse de depot et placement du Quebec (CDPQ), which holds a majority stake of 50.9%. Azure Power has a portfolio of about 7 gigawatts of solar projects in India.
SoftBank Looking To Exit SBG Cleantech
SoftBank Group is looking to sell its majority stake of 80% in the Indian green energy firm SBG Cleantech.
SBG Cleantech is a joint venture between SoftBank, Bharti Enterprises, and Foxconn Technologies. The company has a portfolio of around 7.7 GW of solar projects in India.
The company is reportedly holding separate talks with interested buyers Mubadala Investment, Brookfield Asset Management, and Canada Pension Plan Investment Board (CPPIB) for the sale of its assets. Previously, the company had planned to sell a big minority stake, however, later the decision was taken for the entire stake sale. According to sources, the talks with CPPIB are in advanced stages. Investment banks Bank of America and Barclays have been appointed to run the stake sale process for SB Energy.
Mubadala Investment, Brookfield Asset Management, and CPPIB have been active private equity investors in the Indian renewable energy sector. CPPIB is an investor in ReNew Power, India’s leading renewable energy company. Along with other investors, CPPIB is also keen to acquire a majority stake in Finland’s utility firm Fortum Oyj’s 500 MW of Indian solar projects.
Mubadala Investment acquired a 20% stake in Hero Future Energies in November last year for $150 million.
SoftBank entered the Indian renewable energy market in 2015 and partnered with Bharti Enterprises and Foxconn. SoftBank, the majority stakeholder in the company, had pledged to invest $20 billion to set up 20 gigawatts of renewable energy capacity in India. SBG Cleantech signed investment agreements with a number of states in India.
SBG Cleantech’s rise to one of the largest renewable energy developers was swift but riddled with challenges. In 2018, the Solar Energy Corporation of India (SECI) rejected SBG Cleantech’s 1.1-gigawatt bid to develop solar power projects. At that time it was the single largest bid placed by any developer in India. SECI cancelled the allocation of capacity to five developers, include SBG, on the grounds of cartelization — a charge SBG refuted.
Incidentally, SBG lost another 250 megawatts of capacity in the state of Gujarat. Tariff bids quoted by SBG and two other developers were too high for the tendering agency’s liking.
Apart from these challenges, new developers have emerged who are willing to quote very competitive and record-low tariffs in new tenders. Billions of dollars in unpaid dues by power distribution companies and increasing attempts by states to renegotiate power purchase agreements are making existing investors and developers nervous, leading to increasing cases of stake and asset sales.