An infrastructure fund of Australia’s Macquarie Group Ltd has agreed to buy about 330 megawatts (MW) of operational solar assets from power producer Hindustan Powerprojects Pvt. Ltd for an enterprise value of $600 million, said two people familiar with the discussions. The deal, which will give Macquarie an entry into India’s renewable energy sector, is in an advanced stage of completion and an agreement has been signed, these people said, asking not to be named as the discussions are private. Macquarie Asia Infrastructure Fund (MAIF) will hold a 100% stake in these assets, which are spread across 18 special purpose vehicles, largely in the state of Gujarat, these people said. The projects have been operational since 2010 and have thus signed power purchase agreements at tariffs higher than the prevailing solar energy tariffs.
The Macquarie Group declined to comment. A spokesman for Hindustan Powerprojects also declined comment. Of the $600 million deal value, $250 million is the equity value and about $350 million is the debt associated with the projects, one of the two people cited above said. Macquarie wants to create a renewable energy portfolio consisting of solar and wind projects in India and is simultaneously on the lookout for other assets, this person said. The deal comes at a time when merger and acquisition activity in the sector has heightened and several clean power producers are looking for growth capital.
Hindustan Powerprojects, formerly Moser Baer Projects Pvt. Ltd, currently operates about 600MW of solar power capacity under subsidiary Hindustan Cleanenergy and led by its chairman Ratul Puri. The firm also operates a 1,200MW coal-fired plant in Madhya Pradesh, in which a Macquarie and State Bank of India fund have previously invested Rs580 crore. Mint had reported last month that Macquarie and Hindustan Powerprojects were in talks for the sale of about 320MW in solar assets. Delhi-based Hindustan Powerprojects, formed in 2008, was among the first firms to set up solar projects in India. It plans to reach 2 gigawatts (GW) in total solar capacity by 2017 end and has a target of hitting 7GW of total capacity by 2020 from coal, solar and hydel power sources.
Macquarie is a leading owner and operator of infrastructure assets globally. Since starting its first infrastructure fund in India along with the State Bank of India in 2009, Macquarie has deployed about $2 billion in India’s infrastructure sector. It invested through Macquarie-SBI Infrastructure Fund and infrastructure trust SBI-Macquarie Infrastructure Trust till 2013. It has been investing from MAIF I since 2014. Private equity firm Blackstone Group Lp, which had invested about $300 million in Hindustan Powerprojects in August 2010 and holds more than 30% in the firm, may consider exiting its stake in 2017 through a public listing of the power firm, Mint had reported on 31 December 2015.
In fiscal year 2017, India added 5,526MW of new solar capacity (up 83% from the previous year) and 5,400MW of new wind capacity (up 63%), according to consultancy Bridge Io India. “While these numbers are impressive, it is worth noting that the solar capacity addition including rooftop solar is almost 50% below the annual target of 12,000MW. In contrast, wind capacity addition was +35% over the 4,000MW target,” Bridge To India said in a note on Monday. India’s renewable energy market will need $200 billion in investments to reach its target of 100GW of solar energy and 60GW of wind energy by 2022. There is currently over 10GW of solar capacity and 32GW of wind capacity installed across the country.