Macquarie looks to buy Canadian Solar’s India business

Sydney-based infrastructure asset management group Macquarie Group Ltd is looking to acquire the solar power assets of Canadian Solar in India, said two people close to the development, requesting anonymity. Macquarie’s decision comes at a time when access to funds for renewable energy is drying up in India.

Ontario-based Canadian Solar is a global energy provider with subsidiaries in 20 countries. It is a leading manufacturer of solar photovoltaic modules. It also operates as an engineering, procurement and construction player, besides being a solar park developer. In India, Canadian Solar has a portfolio of 160 megawatts (MW), and has installed over 1 gigawatts (GW) of modules, including a 25 MW solar farm in Bikaner, Rajasthan, and a 35 MW project in Bagalkot, Karnataka. Canadian Solar also has a joint venture with domestic wind power firm Suzlon Energy Ltd to execute solar projects in Telangana.

Macquarie may have to shell out ₹1,000 crore for these assets at a valuation of ₹6-6.5 crore for each MW, said one of the people mentioned above.

A spokesperson for Macquarie declined to comment, while Canadian Solar did not respond to an email seeking comment.

The Indian solar power sector is facing headwinds in terms of a safeguard duty of 25% and a depreciating rupee, pushing up costs for local developers who import a bulk of the solar modules.

The last big deal in the renewable energy sector was in April when ReNew Power announced its plan to buy Ostro Energy for ₹10,800 crore. Since then, appetite for large deals between developers and financial investors has weakened.

Players such as ReNew Power Ventures and ACME Solar, have temporarily shelved plans for initial share sales.

“This is a bad time for the solar sector,” said an industry insider. “Macquarie is the only buyer in the market right now. Other than this, we are seeing deals falling through, no respite from 18% GST on modules, and rising interest rates are squeezing margins for developers.”

“There is no cheap money in this market anymore,” he added, “The high valuations we saw for renewable assets at 8-9 times Ebitda earlier in the year are now past. The sentiment in the market is quite poor.”

Ebitda stands for earnings before interest, tax, depreciation and amortization.

The Indian government has set an ambitious target of generating 100GW of solar power by 2022 from the existing installed capacity of 21.65 GW. Tariffs for electricity produced at utility-scale solar farms touched an all-time low of ₹2.44 per kilowatt-hour earlier this year, but have since risen from those levels.

This article was first published on livemint.com