Asian Development Bank and three other financial institutional investors are eyeing up to 26 percent stake in PTC Energy, according to a source familiar with the development. The transaction is expected to value PTC India’s wholly-owned subsidiary between Rs 2,000 crore and Rs 2,500 crore.
The renewable power generator has signed non-disclosure agreements with the Manila-based multilateral agency and three others for diluting the company’s shareholding. The parent company will not raise any capital from the exercise, the source said.
The other investors PTC Energy has signed pacts which include a US-based private equity fund and a Canadian pension fund.
“PTC Energy will dilute up to 26 percent of its equity. It is open to just one investor picking up the entire 26 percent stake or more than one. Accordingly, the investor will get or not get a seat on the board but PTC India will always maintain at least 51 percent stake in PTC Energy,” the source said.
ICICI Securities is advising PTC Energy on the transaction that the official said had stiff conditions including a 5-year lock-in for the new investors.
PTC Energy ended financial year FY17 (April-March) with a wind power capacity of 288.8 MW. It has a 2021 year target of reaching an installed renewable power capacity of 2,000 MW. While the current portfolio includes only wind power, it aims to have 25 percent of its 2021 capacity coming from solar.
The company has scaled back its power capacity addition target for 2017-18 to 300 MW from 500 MW, owing to uncertainties in the power sector. The company wants to bring in some solar power for the first time to its portfolio — the target being 25 MW-50 MW for the ongoing financial year — the source said.
“PTC Energy is making it very clear to the new investors that there will be a 5-year lock-in. So, even if one of the investors is a private equity company, it knows it cannot force PTC Energy’s hands to buy back its shares or give an exit route before the expiry of the period,” the source said.
The source said an initial public offering of the company was the only exit route that was being offered to the new investors.
“PTC Energy plans to go for an IPO in two-three years and the investors, in case of an IPO, will be free to exit. But the 5-year clause is being inserted so that the company can focus on its expansion and not be forced to divert its attention mid-way,” the source said.
Any incoming investor will also need the approval of PTC Energy’s board of directors if it decides to sell its stake to another entity at the end of five years.
The company wants to time its IPO when it has a 1,000 MW-1,200 MW renewable power portfolio.
Under Prime Minister Narendra Modi, renewable power has come to occupy most of the mindspace of the government and the investors — exemplified by the 2016-17 achievement of renewable power capacity addition overtaking conventional power capacity addition for the first time ever in a given year. The country added 12.5 GW of renewable energy capacity compared to 10.2 GW from conventional sources in the financial year gone by.
India’s 2022 target includes 100 GW of solar — 60 GW ground mounted and 40 GW rooftop. Wind is expected to contribute 60 GW with biomass and small hydro accounting for the remaining 15 GW. Small hydro refers to a hydel unit of up to 25 MW.
PTC Energy’s fund raising exercise seems modest given Sumant Sinha-led ReNew Power Ventures was valued at USD 2 billion this February when it had an installed capacity of 1.5 GW and 1.8 GW under construction.