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IDFC Alternatives to buy Jindal Steel & Power’s wind power unit

05 October, 2016

Debt-laden Jindal Steel & Power Ltd (JSPL) has inked a deal to divest a wind power business in Maharashtra to IDFC Alternatives, the private equity (PE) arm of IDFC Bank Ltd, to generate cash flows, it said on Tuesday. It did not share the deal value.

The deal involves sale of 24MW wind power generating business in Satara to be sold by JSPL to India Infrastructure Fund II, a fund managed by IDFC Alternatives. Parjanya Wind Power Pvt Ltd, an entity owned by the fund, would complete the acquisition.

The transaction is expected to be closed in two months.

In FY16, the wind power unit generated a turnover of about Rs 20 crore. Its net worth was about Rs 112 crore as of 31 March 2016.

For IDFC Alternatives, this comes at a time when it is looking to float a renewable energy investment platform.

Aditya Aggarwal, partner, infrastructure at IDFC Alternatives, told VCCircle last month that the PE firm expects to make its renewable energy platform operational in three months’ time, soon after the infrastructure fund closes a transaction currently in the works to acquire a 250MW asset.

For its platform, it would only consider scaled up, operating assets with existing cash flows, he had said.

Earlier in March 2015, IDFC Alternatives appointed Gaurav Sharma as managing director to bolster its investments in the renewable energy sector. 

Although, JSPL did not share the transaction value, given the industry trends for wind power assets, it could be worth around Rs 100 crore.

Going green

India’s renewable energy sector – especially wind and solar power – has attracted a clutch of financial and strategic investors, lured by opportunities after the government set ambitious capacity addition targets to cater to the rising demand for electricity.

As first reported by VCCircle, ReNew Power Ventures Pvt. Ltd, floated by former investment banker and Suzlon COO Sumant Sinha, is acquiring two wind power projects in Andhra Pradesh and Gujarat.

In June, Tata Power Co. Ltd agreed to buy the renewable energy business of Welspun Group for Rs 9,249 crore ($1.4 billion) including debt, making it the top player in the green energy sector in the country. The deal is the largest in India’s renewable energy sector thus far.

Morgan Stanley Infrastructure Partners-backed Continuum Wind Energy Pte. Ltd sold a small wind power project in India to a Mumbai-based developer Dosti Group.

Last year, Italian renewable energy firm Enel Green Power SpA acquired a majority stake in BLP Energy, the utility scale wind and solar subsidiary of Bharat Light & Power Pvt. Ltd, a clean energy company floated by a former CEO of GE India, for €30 million ($33.5 million or Rs 221 crore). With this transaction Enel entered the Indian renewables market, marking the group’s first move into the Asia-Pacific region.

In another big deal in the making, the Adani Group is mulling to bid for the local solar assets of US-based renewable energy giant SunEdison. SunEdison filed for bankruptcy protection in the US in April after an ambitious growth plan piled up debt that it couldn’t repay.

Last year, Pune-based Simran Wind Project Pvt. Ltd, a unit of Techno Electric and Engineering Company Ltd, sold 44.45 MW wind power assets in Tamil Nadu for Rs 215 crore (about $34 million then) to an unnamed buyer.

In another development, PE firm Actis created an India-focused wind energy platform under Octro and committed $230 million investment.

Through these deals, the acquirers seek to benefit from the Indian government’s ambitious plan of achieving 100 GW of solar and 60 GW of wind power generation capacity by 2022, up from around 4 GW of solar power and about 23 GW of wind power.

The government recently sought to boost hybrid solar and wind power projects in the country with incentives and a financing system to increase renewable energy sources while using existing transmission infrastructure and land better.

In its draft policy guidelines, the Ministry of New and Renewable Resources has set a target of achieving 10 GW generating capacity by 2022 through hybrid solar and wind power projects.

JSPL

In August, JSPL hired an India-based distressed asset advisory firm Capital Optima for the possible restructuring of loans worth $550 million and to consider sale of the cash-positive assets.

It had defaulted on the interest and part principal payment (first of the three installments) of the $150 million unsecured loan that was due in April 2016, and another larger payment of $400 million debt is coming up in the next year. Both the facilities would be taken up for a recast.

In May 2016, Sajjan Jindal-led JSW Energy Ltd agreed to acquire a 1,000-megawatt thermal power plant in Chhattisgarh from JSPL, controlled by his younger brother Naveen Jindal, for up to Rs 6,500 crore ($975 million) including debt. JSW Energy will also pay Rs 500 crore to JSPL as an interest-bearing advance.

JSPL’s consolidated net debt of Rs 46,000 crore is almost six times its current market value at the end of August 2016 compared with Rs 15,600 crore in 2011-12. Its interest payment has increased from Rs 682 crore to Rs 2,670 crore in the last five years.

JSPL’s scrip rose 5.6% to Rs 83 a share, on BSE in a strong Mumbai market.

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IDFC Alternatives to buy Jindal Steel & Power’s wind power unit

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