BENGALURU: Sumant Sinha-led ReNew Power is making a Rs 1,000-crore acquisition of wind power assets of the KC Thapar Group, helping India’s biggest renewable energy player strengthen its position in the rapidly consolidating sector.
ReNew Power will acquire three fully operational plants with a total capacity of 103 megawatts in Andhra Pradesh in one of the biggest deals in renewable energy sector this year, as the market leader shifts its strategy from primarily organic growth to big acquisitions. Re-New Power competed with a dozen Indian and foreign bidders for the assets.
“The acquisition of the KCT Group’s wind assets consolidates our leadership position in India’s rapidly evolving renewable energy space,” Kailash Vaswani, deputy chief financial officer at ReNew Power, told ET.
He did not give financial details of the transaction, but sources said the assets are valued at about Rs 1,000 crore and had 25-year contracts to sell power to distribution companies at Rs 4.80 per unit in agreements signed before tariffs plunged to Rs 3.46 per unit in auctions.
The steep fall in tariffs has sharply reduced margins in solar and wind power business, and helped trigger M&A deals in the sector, particularly after the government started auctioning projects. Several foreign companies have participated in auctions to enter the Indian market, and have made bids for projects on offer.
Kotak Investment Banking, which advised the KCT Group, said there were a dozen strategic and financial investors that were interested in the assets after the sale process began four months ago. “Superior asset quality with turbines from leading global suppliers and favorable location swung the deal.
They enhanced the competitive intensity amongst bidders. Such strong interest is also a testament to the long term attractiveness of the sector and further highlights an increasing trend towards consolidation.”
Said Alok Verma, executive director at Kotak Investment Banking. Vaswani said ReNew Power was acquiring top quality assets. “KCT’s wind farms have been set up in partnership with global technology leaders like GE and Gamesa.
The acquisition gives ReNew Power access to a portfolio of high quality, high efficiency turbines with high plant load factor,” he said. The projects comprise 79 MW at Molagavalli in Kurnool district and 24 MW at Borampalli in Ananthapur district, supplying power to Andhra Pradesh discoms at Rs 4.80 per unit at 25 year long-term contracts.
For ReNew Power, which has largely grown organically, it is the biggest acquisition to date, raising its wind portfolio of fully commissioned projects from around 1500 MW to 1600 MW. The company, which achieved 1000 MW of renewable projects only in April 2016, has more than doubled its footprint in a little over a year to reach nearly 2300 MW.
BIG BOOST TO PORTFOLIO
The acquisition also expands ReNew Power’s wind energy footprint in Andhra Pradesh where it was relatively small until now at 88.2 MW.
ReNew has a much larger presence in wind in the states of Maharashtra, Gujarat, Rajasthan, Karnataka and Madhya Pradesh.
Along with solar projects, both commissioned and under construction, ReNew has a total portfolio of nearly 2300 MW. Only Tata Power Renewable Energy, after its acquisition of the renewable energy arm of the Welspun Group in June 2016, is slightly ahead of ReNew.
The KCT Group, the Vikram Thapar-led arm of the business house founded by Karam Chand Thapar in 1929, has interests in diverse sectors including coal mining, infrastructure, real estate, manufacturing and aquaculture. It entered the wind energy sector in 2013, but for the last few months had been looking for an exit.
The KCT Renewable Energy acquisition is part of a wave of consolidation in the sector during the last 18 months, which began with the biggest of them all – Tata Power’s buyout of Welspun Energy’s renewable portfolio of 1140 MW for Rs 9,249 crore in June 2016. Another was Greenko Energies’ takeover of the Indian assets of around 500 MW of US-based SunEdison for $392 million in October 2016 after the latter went bankrupt. In June this year, CLP India, a wholly owned subsidiary of Hong Kong-based CLP Holdings, bought a 49% stake in Suzlon’s solar subsidiary SE Solar for Rs 73.5 crore. In July, Vector Green Energy, the renewable energy arm of IDFC Alternatives, acquired 190 MW of solar assets from US-based First Solar for an undisclosed amount.
In mid-October, the Hero Group acquired 83.5 MW of wind energy projects from the LNJ Bhilwara Group for an undisclosed amount.
In late October, infrastructure fund Global Infrastructure Partners (GIP) acquired the complete renewable energy portfolio of around 1100 MW of Singapore based Equis Energy for $5 billion, more than half of which is in India.