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GIC, ADIA-backed Greenko set to buy stake in large hydro project
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Greenko Group, India’s most-funded renewable energy company, is set to acquire a stake in a large hydropower project that was developed in a public-private partnership and has been dogged by controversies, VCCircle has learnt.

Hyderabad-based Greenko, backed by Singapore sovereign wealth fund GIC and Abu Dhabi Investment Authority, is to buy a stake in Teesta Urja Ltd, which operates a 1,200 megawatt (MW) power plant in North Sikkim.

The Sikkim government owns a tad above 60% stake in Teesta Urja while five private-sector companies own the rest. The Sikkim government is not selling its stake, a top state official told VCCircle, asking not to be named. 

This means that Greenko will most likely buy the stake from one of Teesta’s other minority investors.

Teesta’s largest minority stakeholder is Singapore-based Asian Genco Pte Ltd, with a stake of almost 25%, according to the power company’s annual report for 2018-19. Asian Genco is a private equity-backed company that has been embroiled in its own legal battles over corporate governance issues.

Teesta’s other shareholders include Mumbai-listed power trading company PTC India Ltd with a stake of 5.62%, and Delhi-registered companies Athena Projects Pvt. Ltd, APPL Power Pvt. Ltd and Indus Clean Energy (India) Pvt. Ltd.

The stake being bought and the valuation at which the deal is likely to be sewn is not clear. But Greenko is likely to pick up a stake of at least 10% and up to 40% as stake sales by government bodies usually call for open tenders rather than bilateral deals.

There have been only a handful of hydropower transactions in the country. The last significant deal was struck five years ago when JSW Group bought assets of debt-laden Jaypee Group. That transaction was valued at $1.4 billion for assets comprising 1,400 MW capacity.

Given the debt and equity on the books of Teesta Urja, it is likely to command an enterprise valuation of around Rs 12,000 crore ($1.6 billion).

The company’s revenue from operations rose to Rs 1,613.5 crore for 2018-19 from Rs 1,305.8 crore the year before. It posted a loss of Rs 313 crore for 2018-19 compared with Rs 701 crore the year before.

A questionnaire to Greenko and Asian Genco remained unanswered. Multiple attempts to reach senior officials at Teesta Urja failed, too. 

Teesta’s troubles

The Teesta project is the largest hydroelectric plant in Sikkim. It has faced a lot of controversy ever since the state government awarded it to Teesta Urja, which allegedly had suspect credentials, in 2012.

Some news reports have previously alleged that the supposed irregularity had involved prominent politicians and bureaucrats of the day, though VCCircle cannot independently verify the authenticity of these claims.

The project was initially awarded to Athena, which then promoted a special purpose vehicle called Teesta Urja with investments from Asian Genco. The company offered a 26% stake to the state government in July 2012.

Asian Genco, which has investments in a few Indian power generation assets, has been looking to exit Teesta Urja. It had raised about $425 million in 2010 from several private equity firms. The investor group included Morgan Stanley Infrastructure Partners, Norwest Venture Partners, General Atlantic, Goldman Sachs and Everstone Capital.

In 2014, Asian Genco's main promoter, Vijaykumar TV, filed a police complaint after relations with PE funds reportedly soured as investors were unhappy over the delay in the start of the projects including Teesta, according to a Business Standard report at the time. In the same year, the state government said it was ready to buy out the PE firms after the investors complained to the Centre about cost overruns at the project, according to media reports.  

The project, consisting of six units of 200 MW each, finally started in February 2017, much behind the 2013 schedule. Despite becoming fully operational, the project has been dogged by issues such as lack of adequate transmission infrastructure, cost overruns and the sale of power at a discounted rate on the open market.

The Teesta deal comes even as Greenko has been looking to ramp up capacity. In August, VCCircle had detailed how the renewable energy major had raised more than $2.6 billion via bond sales and equity capital. 

The VCCircle report had noted how Greenko’s two sovereign fund backers – GIC and ADIA – had injected $2.2 billion into the company. While GIC owns two-thirds of the company and ADIA holds a 16% stake, founders Mahesh Kolli and Anil Kumar Chalamalasetty own less than a fifth.

In July, GIC and ADIA said they would infuse $329 million more into the company, after committing $495 million barely a month before. Greenko is the most-funded renewable energy company in India, outpacing the likes of ReNew Power Ltd. 

The company has been on an expansion spree setting up new capacities and acquiring existing assets. It used part of the equity capital it raised for capacity expansion and acquisitions.

In June last year, it said that it would use the $495 million it was raising from GIC and ADIA to build two hydro-storage projects of 1.2 gigawatt each. Greenko is likely to spend a combined $2 billion on these projects, Fitch Ratings had said in a report in August last year.

These two projects, in conjunction with solar and wind power plants, will take Greenko’s installed capacity to 6.5 GW from 4.1 GW, perhaps making it the largest renewable energy company in India, the VCCircle report had noted.

In so far as merger and acquisition deals go, Greenko has acquired assets from several peers including Suzlon, SunEdison and Lanco Hydro Power. In all, VCCEdge, the research arm of Mosaic Digital, shows that the company’s M&A deals have been of the order of $1.9 billion.

In October 2018 alone, Greenko struck two of its biggest acquisitions, buying Orange Renewable Holdings Pvt. Ltd from Singapore’s AT Capital Group and Skerion from beleaguered wind power company Suzlon Energy Ltd. Two years before, it had acquired the India renewable energy business of US-based SunEdison, adding 1.5 GW to its portfolio. 

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