Sembcorp buying 60% stake in IDFC Alternatives-controlled Green Infra for $168M

Singapore-based infrastructure firm Sembcorp Industries is buying 60 per cent stake in seven-year-old renewable energy company Green Infra Ltd, which was incubated by private equity firm IDFC Alternatives, for Rs 1051 crore ($168.5 million), it said on Wednesday.

The deal is being routed through Sembcorp Renewables a part of Sembcorp Utilities, which in turn is a wholly owned subsidiary of Sembcorp Industries. It is expected to be completed by the end of this month.

It is not clear if the deal only involves a share sale by IDFC Alternatives, the PE arm of IDFC Ltd, or also involves subscription to fresh securities.

An email query to a Sembcorp spokesperson for more details did not immediately elicit a response.

The deal values Green Infra at over Rs 4,400 crore (over $700 million).

This transaction will result in IDFC Private Equity Fund II exiting completely and IDFC Private Equity Fund III continuing to hold 40 per cent stake in the company with a secured path to exit, including through a possible IPO.

IDFC Alternatives incubated Green Infra in 2008 to capitalise on India’s renewable energy potential.

“Today, the renewables sector is at an inflection point and it is the right time to partner with a large multi-national utility like Sembcorp to take the company to the next level of growth,” Girish Nadkarni, partner, IDFC Alternatives, said.

“The transaction exemplifies our strategy to identify and invest early in high growth sectors, build a strong and experienced management team with high governance standards, scale up the company and invite a world class strategic partner to provide timely exit to our investors and also accelerate the growth of the business,” Satish Mandhana, managing partner and CIO of IDFC Alternatives, said in a prepared statement.

IDFC Alternatives had invested a total of Rs 440 crore in Green Infra through two tranches in 2008 and 2011. The company had hired Shiv Nimbargi as its managing director and CEO and Pinaki Bhattacharyya (previously a director with IDFC PE) as its CFO.

Green Infra has grown to become one of India’s leading renewable energy companies with an operational portfolio of 516 MW increasing to 700 MW in the next few months. In addition, the company has a development pipeline of over 750 MW. Currently, it has a target to be a 5 GW renewable energy firm.

What it means for Sembcorp

The investment marks Sembcorp’s entry into the fast growing renewable energy sector in India. It will be channelling all its investments in the wind and solar space in India through Green Infra.

The group already has exposure to India through thermal power projects.

Comprising 665 MW of wind and 35 MW of solar assets in operation and under development, and located in six renewable resource-rich states in the southern, western and central regions of India, Green Infra’s portfolio will almost triple Sembcorp’s current renewable energy generation capacity globally to over 1,000 MW.

The acquisition will also provide Sembcorp with solar power capabilities, and broadens the technology footprint of Sembcorp’s current renewable energy portfolio beyond wind, biomass and energy-from-waste.

The major part of Green Infra’s electricity output is sold under long-term power purchase agreements with India’s state electricity boards, while the remaining output is sold under long-term contracts with commercial customers.

Tang Kin Fei, Sembcorp group president & CEO, said, “This acquisition will provide Sembcorp with a platform to grow our renewable energy business. Green Infra’s strong capabilities and experienced team will help to accelerate our growth in the renewable energy sector not only in India, but globally.”

In the past Sembcorp had built presence in coal fired power projects in India. Last July it increased its holding in Thermal Powertech Corporation India (TPCIL) to 65 per cent by acquiring an additional 16 per cent stake for Rs 400 crore ($66.6 million). The remaining stake in TPCIL is held by Gayatri Energy Ventures, a wholly-owned subsidiary of Gayatri Projects.

TPCIL is developing a 1,320-megawatt (2x660MW units) coal-fired power plant located near sea coast of Bay of Bengal at Krishnapatnam in Andhra Pradesh.

In May 2010, Sembcorp had acquired 49 per cent stake in the firm for $219 million (Rs 1,042 crore). This was Sembcorp’s first power project in India.

Early last year, Sembcorp had struck a separate deal to pick 45 per cent stake in 1,320 MW thermal power project under implementation near Krishnapatnam for Rs 848 crore ($135 million). It had also said it will enter into an agreement which gives it the option to buy a further 20 per cent in the project which is housed under NCC Power Projects.

NCC Power Projects is a joint venture between Gayatri Energy Ventures and NCC Infrastructure Holdings Ltd, a wholly-owned subsidiary of NCC Ltd.

“Sembcorp have thus far done two transactions on the thermal side and therefore, renewable space was the next logical expansion for them,” Manish Aggarwal, partner – corporate finance & head - energy & natural resources, KPMG in India.

Singapore Stock Exchange-listed Sembcorp is a leading energy, water and marine group operating across six continents worldwide, owning 7,200 MW of power assets globally. It also has over 8 million cubic metres of water/day capacity in operation and under development. It is also present in marine & offshore engineering and urban development.

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