Sumant Sinha-led Re-New Power Ventures has finalised the takeover of Ostro Energy for an enterprise value of ₹10,800 crore ($1.66 billion), the biggest M&A deal in the renewables sector, sources close to the deal said.
The deal, part of the wave of consolidation in the rapidly-expanding sector, makes ReNew Power the largest renewable energy company in the country with total commissioned and under-construction assets of about 4,300 MW.
It is now well ahead of Tata Power Renewable Energy, which, with its ₹9,249 crore acquisition of Welspun’s assets in June 2016, is in the second spot with total renewable assets of around 2,300 MW.
ReNew will pay around ₹4,500 crore as equity, while the remaining ₹6,300 crore will be the debt component. “ReNew believes these are excellent assets of a quality that few players in the country have,” said one of the sources. “Since most of them are operational, they also mitigate the risks associated with Greenfield projects.”
Neither ReNew Power nor Ostro Energy was willing to confirm the development.
Ostro Energy, set up in June 2014, has commissioned wind assets of 648 MW and another 350 MW are in the pipeline. It is also building around 110 MW of solar projects, making it a total of 1,108 MW across the states of Andhra Pradesh, Telangana, Karnataka, Rajasthan, Gujarat and Madhya Pradesh.
Ostro’s principal backer is the London-based private equity firm Actis, which invested $280 million in the company in early 2015. Actis invests exclusively in emerging markets and currently has interests across 21 countries. However, Actis has been looking for a profitable exit from Ostro for nearly a year now and had appointed Bank of America Merrill Lynch to find a suitable buyer. Talks with Re-New Power have been on since last October-November.
ReNew Power, which has been planning an IPO for some months now, boasts a string of marquee investors including Goldman Sachs, Abu Dhabi Investment Authority (ADIA), Global Environment Fund (GEF), Canada Pension Plan Investment Board (CPPIB) and Japan’s JICA. JICA’s infusion of 10% stake in February 2017 valued the company at $2 billion.
While most of ReNew’s early projects started from scratch, it has lately been taking the inorganic route as well. In November, it bought the KC Thapar Group’s entire wind portfolio of 103 MW for around ₹1,000 crore. It also is reportedly planning a foray into solar equipment manufacturing, with talks on to acquire solar manufacturer Waree Energies.
The latest deal is part of a wave of consolidation in the renewable energy sector, which began with Tata Power’s buyout of Welspun Energy’s renewable assets.
Another major acquisition was Greenko Energies’ takeover of the Indian assets of US-based SunEdison for $392 million (₹2,500 crore) in October 2016, after the latter declared bankruptcy. Apart from ReNew’s acquisitions and Actis’s of Bhoruka, others include the Hero Group’s takeover of the wind portfolio of LNJ Bhilwara Group for an undisclosed sum in October last year and Vector Green Energy’s purchase of 190 MW solar assets from US-based First Solar for an undisclosed amount in July last year.