CPPIB sets pre-conditions to acquire SoftBank stake in India’s SB Energy

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Canada Pension Plan Investment Board (CPPIB) has placed several pre-conditions to acquire Japan’s SoftBank Group Corp.’s controlling stake in SB Energy Holdings for an estimated $520 million, said two people aware of the development.

These pre-conditions, also referred to as condition precedents (CPs), include meeting certain project commissioning deadlines, securing new businesses, achieving land possession from the Andhra Pradesh government and reimbursement of safeguard duty for a project in Rajasthan, the people said, requesting anonymity.

 

India's green energy space has seen plenty of deal activity in recent years. Here's a look at the top five deals

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India’s green energy space has seen plenty of deal activity in recent years. Here’s a look at the top five deals

The other CPs put by Canada’s largest pension fund before it finalizes one of India’s largest green energy deals include getting the Punjab government onboard for buying electricity from a project, a bond issuance, as well as SoftBank bearing any future, liquidated damages liability.

Bank of America and Barclays are managing the stake sale process, with each CP having a monetary component attached to it.

SoftBank owns 80% in SB Energy, which has a 7.7GW solar power portfolio in India. The rest 20% stake is held by Bharti Enterprises Ltd.

Spokespersons for CPPIB, Barclays Bank India, Bank of America and Bharti Enterprises declined to comment. Queries emailed to SB Energy’s chief executive officer Raman Nanda, SB Energy’s country head and president India Rohit Modi and SoftBank Group spokesperson on 4 January remained unanswered till press time.

“One of the CPs is about securing around 3GW of solar projects by 2022,” said one of the two people cited above.

“The deal is going ahead with the parties involved working on completing the CPs,” said a second person cited above, requesting anonymity.

The latest valuation of SB Energy is less than the one expected by the sector given SoftBank had invested more than $800 million in the business in the past five years. The stake sale efforts follow SB Energy dropping its plan in July last year to raise $600 million through a dollar bond.

The Economic Times reported on 30 December that currently 75% of SoftBank’s stake is being transferred to CPPIB and if the conditions precedent are not met, SoftBank will transfer a 5% stake that it is temporarily holding as security for free to CPPIB.

The transaction comes at a time when India’s solar power tariffs have touched a record low of 1.99 per unit at an auction conducted in December by Gujarat Urja Vikas Nigam Ltd. The rates are expected to decline further. Also, India plans to impose a basic customs duty of 40% on modules and 25% on cells from 1 April 2022.

Mint reported on 6 July 2020 about SoftBank’s plan to sell its entire stake, in a change from its earlier approach for finding a ‘significant’ minority investor, and its separate talks with CPPIB, Canada’s Brookfield Asset Management Inc. and Abu Dhabi government’s sovereign wealth fund Mubadala Investment Co. for the sale.

Meanwhile, fund-starved power distribution companies going tariff shopping and falling clean power tariffs have put an already-awarded 16.8GW solar and wind energy capacity in limbo.

Despite these issues, there has been growing interest in India’s green economy with several deals in play. Some of the other potential green energy deals in the works as reported by Mint include Brookfield signing an exclusivity agreement to buy Mahindra Susten’s engineering, procurement and construction business and 1,200MW of solar assets, state-run NTPC Ltd and SJVN Ltd placing bids to buy out PTC India Ltd’s 289MW wind power assets, and Norway’s Scatec ASA, Saudi Arabia’s Aljomaih Energy and Water Co. and Italy’s Eni SpA separately scouting for solar assets in India.

This article was first published on livemint.com.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.