Abu Dhabi Sovereign Fund ADIA eyes $200 million investment in Greenko

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MUMBAI: Six months after making its first bet on India’s fast growing renewable energy sector, sovereign wealth fund ( SWF) Abu Dhabi Investment Authority ( ADIA) is gearing up for a rerun.  ADIA is in advance negotiations with Hyderabad headquartered Greenko Group to invest between $170-$200 million for a minority stake, said multiple sources aware of the ongoing negotiations. ADIA’s growing interest in this sector reflects the emirates’ focussed strategy to diversify from petroleum and other fossil fuels and back newer, clean tech ventures across the region, especially in emerging geographies like India. The transaction is expected to close at a $1 billion post money valuation. The company also had $800 million debt, as on December end, implying an enterprise value of $1.6 billion. ADIA has already submitted a binding term-sheet and the final rounds of negotiations are ongoing. A formal announcement is expected in the coming weeks, one of the sources cited above said on condition of anonymity as the talks are still in private domain. Formerly listed in London’s AIM exchange, Greenko is among the largest green energy power producer in the country and is majority controlled by GIC of Singapore. GIC, also a SWF, owns close to 84% in the company held through various offshore investment vehicles while the two founders Anil Chalamalasetty and Mahesh Kolli owning the rest. Greenko currently has an operational portfolio of 1.1 GW (1100 MW) of wind, hydro, biomass and natural gas power assets and a pipeline of another 1.6 GW, half of which are due for completion by end of 2016. The fresh round of fund raising will help bankroll the growth plans of the company. In February 2014, Greenko acquired Lanco InfratechBSE 2.73 % Ltd’s 70 MW Lanco Budhil hydropower project and two smaller plants of 5 MW each in Himachal Pradesh for close to Rs 650 crore. In the same year, it also raised $550 million through an overseas bond sale. Existing investors GIC has already pumped in a fresh round of $80 million to fund the pipeline. ADIA now comes on board as part of a larger $250 million capital raise.  This will be ADIA’s second bet in the sector having invested $200 million last October in Sumant Sinha founded ReNew Power which is backed by Goldman Sachs. Post the Greenko transaction, Abu Dhabi will be responsible for being among the top FDI providers to the clean energy sector. An ADIA spokesperson declined to comment on market speculation. Mails sent to GIC and Greenko spokespersons did not generate a response till the time of going to press. Chalamalasetty and Kolli also did not respond to ET’s detailed email queries. Sources add, ADIA has been pursuing Greenko for almost a year now. Its earlier overtures were spurned as GIC took control of the company’s Mauritius based holding firm last October. Earlier this year, both sides re-engaged when Greenko was in discussions with Welspun to acquire the latter’s renewable energy portfolio. The SWF was to provide equity funding, if those plans came through. But those talks did not fructify.  “This is a win-win for all. Company gets fresh equity to grow. GIC still remains the controlling shareholder in the company but it is taking some money off the table. It is a sensible thing to do as they are a financial investor who would like to monetise their investments sometime… As the equity value goes up, there will be fewer players who can potentially provide an exit to GIC in the near future. I would say, they are making their investment manageable now,” said a Mumbai based analyst, specialising in the sector. The Modi government has set ambitious targets for expanding renewables to help meet the power-starved country’s rapidly growing energy needs, and fulfil its promise of ensuring all Indians have access to uninterrupted 24 hour supply by 2019. By 2022, India hopes to have 60 gigawatts of wind energy capacity, up from 25GW of installed wind capacity at present, and 100GW of solar power capacity, up from just 4GW now, seen as a tremendous opportunity for clean energy companies.  “Abu Dhabi is becoming very close to Prime Minister Modi. They are willing to back most of his flagship ventures in sectors of mutual interests like energy or telecommunications and infrastructure. This is a long term strategic engagement. ADIA representatives have spent significant time with power minister Piyush Goyal understanding the dynamics. They want to do more,” added a Dubai-based consultant who works very closely with the SWF. For example, ADIA has also been keen to make a $5-billion bet on India’s national highways, expressing interest to take up 50 highway projects on a oll-operate-transfer (TOT) basis in what will be the first investment of its kind if it happens. ADIA too has been proactively pursuing investments in the power utilities space. Other than ReNew, earlier this February it picked up a 36% stake in Peruvian Fenix Power, a thermoelectric power generation company in Lima, as part of a consortium transaction valued at US$786 million. Similarly, in November, an ADIA led group agreed to invest A$10.3 billion (Dh27.42bn) in TransGrid Electricity Network, one of Australia’s biggest utilities, in a deal involving a 99 year lease. It is also a limited partner in a handful of India centric real estate PE funds.

Source:  ET Bureau

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