Canada’s Brookfield Asset Management Inc., private equity firm Actis Llp and Edelweiss Infrastructure Yield Plus Fund’s Sekura Energy Ltd have offered to buy a majority stake in Finnish state-run power utility Fortum Oyj’s 500 megawatts (MW) solar projects in India in a deal estimated at about half a billion euros, said two people aware of the development.
The three parties have submitted three separate non-binding bids for the deal, which is expected to be completed by March, the people cited above said, requesting anonymity. Kotak Investment Banking is managing the sale process.
“The bids have been placed, and there has been substantive interest in these assets. The sale process is expected to be completed by March,” one of the two people cited above said, requesting anonymity.
Sanjay Aggarwal, managing director of Fortum India Pvt. Ltd, declined to comment. Spokespeople for Brookfield and Edelweiss also declined to comment.
Queries emailed to spokespeople for Kotak Investment Banking and Actis on Friday remained unanswered.
The stake sale is part of Fortum’s strategy to take risks early on and eventually monetize projects to raise capital for new ventures.
About half of the 500MW projects on offer is currently operational and the remainder is nearing completion.
In addition to selling a controlling stake in the existing projects, the deal also involves bringing these 500MW solar projects under a new platform, in which new investors will contribute significant equity to develop projects in India and overseas.
Mint reported on 1 June last year about Actis, Brookfield, Edelweiss Infrastructure Yield Plus Fund, Canada Pension Plan Investment Board (CPPIB), KKR and Macquarie Group evincing interest in Fortum’s solar assets in India.
Fortum, the third-largest Nordic utility, plans to develop around 500MW each year in India and overseas.
Fortum India currently has around 700MW of operational solar projects. It is also building a bio-ethanol plant at Numaligarh refinery in Assam, waste to energy, and charging stations for electric vehicles. The company had in June 2018 agreed to sell a 54% stake in 185MW solar projects in India to UK Climate Investments (40%) and Elite Alfred Berg (14%).
Canadian firms such as Brookfield, CPPIB and Caisse de dépôt et placement du Québec (CDPQ) are placing large bets on India’s clean energy story.
With more than $575 billion in assets under management, Brookfield has invested about $20 billion in India so far. It recently signed an exclusivity agreement to buy Mahindra Susten’s engineering, procurement and construction (EPC) business, besides 1,200MW of solar assets, at an enterprise value of around ₹5,000 crore as reported by Mint earlier.
Investor interest in the solar power business has sustained despite solar tariffs in India touching a record low of ₹1.99 per unit, and tariff shopping by electricity distribution companies (discoms).
The latest case in point being Gujarat cancelling 700MW solar power generation tenders to Temasek and EQT owned O2 Power, Global Infrastructure Partners’ Vena Energy, Tata Power, and Goldman Sachs and CPPIB promoted ReNew Power.
A total investment of ₹4.7 trillion has been made in India’s renewable energy space in the last six years, with an expected ₹1 trillion investment opportunity annually till 2030. The country has a 450 gigawatts (GW) renewable energy target by 2030 to help reduce its carbon footprint by 33-35% from the 2005 levels as part of its commitments to the United Nations Framework Convention on Climate Change adopted by 195 countries in Paris in 2015.
This article was first published on livemint.com