Aditya Birla Nuvo to form solar power platform with Abraaj

Kumar Mangalam Birla-controlled diversified business conglomerate Aditya Birla Group and Dubai-based private equity firm Abraaj Group have agreed to join hands to build a large scale renewable energy platform focused on developing utility-scale solar power plants in India, according to a press release.

Financial terms of the deal, however, have not been disclosed by the two companies.

The development comes after diversified public listed group firm Aditya Birla Nuvo Ltd (ABNL) said in July that it is looking to enter the solar energy space through a special purpose vehicle (SPV) or subsidiary that would bid for upcoming solar power projects of the government as well as in the private sector. It had also said that it would induct investors in it.

Under the agreement, emerging markets focused PE firm Abraaj would pick 49 per cent stake in Aditya Birla Renewables Ltd, currently a wholly owned subsidiary of ABNL. ABNL would hold 51 per cent stake in the JV.

Abraaj and ABNL will build a gigawatt scale platform that will bid for new solar projects tendered at national and state auctions, Abraaj said in the statement.

As part of its efforts to foster the use of renewable energy, the Indian government has eased regulatory policies and set a target of 100 GW of solar power capacity by 2022 against the current installed capacity of over 4 GW. This would include 40 GW rooftop and 60 GW through large and medium scale grid connected solar power projects.

“The gap in energy infrastructure in growth markets translates into a long-term and sustainable investment opportunity. Renewable energy is set for explosive growth, thanks to technological advances, favourable policies and pricing structures, that make it a competitive alternative to conventional power generation,” said Sev Vettivetpillai, partner and global head of Abraaj’s Thematic Funds Business.

The Abraaj Group has investment experience across the energy value chain and has invested $1 billion in 10 investments in global growth markets. It invests in Africa, Asia, Latin America, Middle East and Turkey managing approximately $9 billion of funds.

The PE firm that had acquired Aureos Capital, a global private equity fund management group investing in small and medium-sized enterprises across Asia, Africa and Latin America, has been quiet lately in India. Indeed, this is its first deal in almost two years.

Meanwhile, this comes as another such renewable energy platform. In July this year, another Indian business conglomerate Bharti Enterprises Ltd had said it is forming a joint venture for producing renewable energy in the country in partnership with Japanese internet and telecom major SoftBank Corp and Taiwan-based design and  electronics manufacturing services firm Foxconn Technology Group. The venture christened SBG Cleantech Ltd envisages an investment of around $20 billion over a period of time.

In other deals, in June, Delhi-based solar power company Applied Solar Technologies India Pvt Ltd secured $40 million in a fresh round of funding led by the Australian government’s sovereign wealth fund Future Fund Management Agency. Its existing investors—Bessemer Venture Partners, Capricorn Investment Group and IFC—also participated.

More recently, infrastructure-focused private investment firm I Squared Capital invested in Amplus Energy Solutions Pvt Ltd, an owner and operator of distributed rooftop solar power in India.

The renewable energy JV marks another such partnership by Aditya Birla Group to expand its business interests. In June, ABNL entered into an agreement with South African firm MMI Holdings Ltd to form a health insurance and wellness JV in India. The group had earlier forayed into the life insurance sector in 2010 with Canadian JV partner Sun Life Financial Inc.

Greenstone Energy Advisors advised Aditya Birla Group on the transaction.

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