MUMBAI: The sun is finally setting on SunEdison in India. The US company that started the solar power frenzy around the world and especially in India with super high growth projections and super low tariff bids for new projects before it went belly up earlier this year and filed for bankruptcy, is all set to sell its entire Indian portfolio to Greenko, said multiple sources aware of the development.
Hyderabad-headquartered Greenko Energy Holdings, the hottest Indian green energy company among global investors, has piped UK private equity Actis-backed renewable platform Ostro Energy to strike the deal after months of negotiations, they said.
Greenko is acquiring SunEdison’s operating 390 MW solar portfolio and 48 MW of wind parks for an enterprise valuation of $315 million, in what would be the biggest distress sale of all time in the sector. This includes an equity value of $30 million and around $280 million of debt, as per two executives involved directly in the ongoing negotiations. They spoke on the condition of anonymity as the talks are in private domain.
A pipeline of another 800 MW will also get transferred to Greenko for no extra cost. Greenko, backed by GIC and Abu Dhabi Investment Authority, has agreed to pump in $50-60 million as equity funding to build these new projects and will also take on additional debt for capital expenditure. This, however, would still be much lower than the originally envisaged billion-dollar-plus valuation. The deal would mark Greenko’s entry into solar, after missing out on Welspun‘s solar business that Tata Power bought recently.
Pashupathy Gopalan, managing director and president (Asia Pacific) at SunEdison, and a Greenko spokesperson declined to comment.
“Both sides have come to an in-principle agreement and are looking at a formal announcement latest by this month end. They are waiting for US bankruptcy courts and the lenders to give their go-ahead. It should have come last week itself,” said an executive in the know.
SunEdison, the world’s largest renewable energy company, has been looking to divest its global assets ever since it filed for protection from creditors in the US in April this year. It had mandated investment bank Rothschild to help sell its Indian portfolio, which was once considered its crown jewel. The process drew interests from a diverse set that also included Adani and Singapore utilities major Sembcorp.
The deal is going through as investors of Terraform Global, SunEdison’s separately listed arm, have given their consent by waiving their first right over many of these Indian energy parks. Terraform had sued its parent alleging that it diverted funds to cook its balance sheet instead of completing these projects that were already pre-sold to them.
Even though Greenko is taking its boldest bet in India so far to make a significant solar power debut, the acquisition makes strategic sense. For starters, the portfolio is coming cheap, believe sector experts. Secondly, SunEdison’s current footprint includes states like Telangana, Andhra Pradesh, Karnataka and Tamil Nadu, perfectly complementing Greenko’s current operations and thereby offering a larger contiguous play, focussing on the southern states. More importantly, the power purchase agreements in the older SunEdison projects average Rs 6-7 a kilowatt hour (KwH) and are economically feasible.
Global players like SunEdison had aggressively bid in auctions to drive prices down to unviable levels such as the 500 MW project in Kurnool, Andhra Pradesh, won in November last year. For it, the company quoted a tariff of Rs 4.63 per kwH, a historic low at that time.
“These are grid parity PPAs and that would make sense for a cautious player like Greenko that strive for 18 per cent IRR in its projects. The SunEdison pipeline is mostly unviable. It however makes sense to get them for no extra cost,” said an executive privy to the discussions.
Sources said, singed by past adventurism, the lenders too preferred a well-known local player like Greenko than an overseas fund-backed entity such as Ostro.
Started by two Hyderabad-based entrepreneurs, Anil Kumar Chalamalasetty and Mahesh Kolli, privately held Greenko counts Singapore’s GIC and ADIA as key shareholders. GIC owns a controlling 60 per cent interest in the company and ADIA has close to 15 per cent. The two founders own the remaining, said one of the people mentioned above.
This June, ADIA made a $150 million investment while GIC agreed to fund another $80 million of new investments, at a $1 billion post money valuation. The company also has debt of $1 billion, implying an enterprise value of $2 billion. The valuations were not officially disclosed.
Last month, Greenko raised $500 million from marque global investors through the country’s first high yield green bond issuances, which according to investment bankers, saw demand at eight times. The proceeds were largely meant for refinancing legacy debt and also to build a war chest for acquisitions.
The company is expecting to post $200 million EBITDA in fiscal 2017, and is eyeing to treble that by fiscal 2019.
Formerly listed in London’s AIM exchange, Greenko is among the largest green energy power producers in the country with an operational portfolio of more than 1 GW of wind, hydro, biomass and natural gas power assets and a pipeline of another 1.8 GW, scheduled to be ready by December 2018. It had said the fresh round of fundraising will help bankroll the growth plans, including diversification into solar.
In February 2014, Greenko acquired Lanco Infratech’s 70 MW Lanco Budhil hydropower project and two plants of 5 MW each in Himachal Pradesh for Rs 650 crore. In the same year, it also raised $550 million through an overseas bond sale.
Having stayed away from the fierce bidding for solar parks in the past, Greenko has been finalising its blueprint to enter the space with plans to build a similar 1 GW solar portfolio to match that of wind. Company executives had earlier said they are exploring co-location opportunities in its existing wind farms.