ReNew Power Ventures Pvt. Ltd will acquire rival Ostro Energy Pvt. Ltd from private equity firm Actis, striking the largest buyout in India’s renewable power sector and becoming the top green energy company by capacity.
The transaction will increase ReNew Power’s total operational and planned capacity to 5.6 gigawatt from 4.5 GW, the company said in a statement.
It didn’t disclose the deal value, but said existing investor Canada Pension Plan Investment Board (CPPIB) will make an additional investment of $247 million (Rs 1,606 crore) in ReNew Power to help finance the acquisition.
The new commitment will take CPPIB’s total investment in ReNew to $391 million; it had injected $144 million in January. This will increase its total investments in India thus far to nearly $5.25 billion. As on 31 December 2017, CPPIB’s investments in India totalled C$6.4 billion ($5 billion).
A person familiar with the transaction said the deal’s enterprise value (including debt) is about Rs 10,000 crore ($1.54 billion). That trumps the $1.4 billion acquisition of Welspun Renewable Energy Pvt. Ltd and its 1.1 GW of projects by Tata Power Co. Ltd in 2016.
For Actis, the deal provides an opportunity to cash out the investment it made in Ostro. The PE firm had set up Ostro in early 2015 with a committed investment of $230 million. It hired an investment banker last year to sell Ostro.
The transaction adds to the hectic pace of activity in India’s renewable energy sector over the past few years, especially after the government in early 2015 set a target of 100 GW solar and 60 GW wind power capacity by 2022. The solar capacity has reached almost 20 GW while wind capacity stands at 33 GW, government data show.
The revised target attracted hordes of foreign investors. These include Japan’s SoftBank, Italy’s Enel Green Power SpA, Russia’s OAO Rosneft, China’s Trina Solar and US-based First Solar Inc. CPPIB and its peer Caisse de dépôt et placement du Québec (CDPQ) have also committed investments in the Indian clean energy sector.
ReNew’s rapid rise
ReNew was established in 2011 by Sumant Sinha, former executive at wind-turbine maker Suzlon Energy. It has raised almost $850 million from Goldman Sachs, sovereign wealth fund Abu Dhabi Investment Authority, Asian Development Bank, Global Environment Fund and Japan’s Jera Co. Inc, which had invested $200 million last year. This amount doesn't include CPPIB's investment, which includes fresh capital infusion and a secondary stake purchase from the ADB.
The company has expanded quickly, both by setting up new projects and through acquisitions. It struck three acquisitions in 2016—Helios Infratech’s 180 megawatt wind power project in Andhra Pradesh, Ahmedabad-based Veer Energy and Infrastructure, and four solar projects of Vikram Power Ventures. In November 2017, ReNew Power agreed to acquire three operational wind power assets of KC Thapar Group with a total capacity of 103 MW.
The latest deal will catapult ReNew Power as the largest renewable energy producer by capacity from the No. 2 rank currently. The company has 2.8 GW of operational projects and 1.7 GW under construction. Ostro’s total capacity includes nearly 850 MW of operational assets, spread across Andhra Pradesh, Karnataka, Telangana, Rajasthan, Madhya Pradesh and Gujarat.
The biggest renewable energy company is Greenko, which has 3.2 GW of operational assets and 800 MW of projects under construction. Greenko aims to increase its power generation capacity to 5 GW by 2019 and is also looking to acquire operational assets. It is said to be in talks to acquire Delhi-based Orange Renewable. In 2016, Greenko had bought the Indian assets of US-based SunEdison Inc. Last year, it bought Pennar Renewables Pvt. Ltd.