NEW DELHI/MUMBAI: Tata Power Company has said its renewables arm has signed an agreement with Welspun Energy Pvt Ltd to acquire its green energy portfolio for an estimated at Rs 10,000 crore ($1.4 billion).
In a statement issued late on Sunday night,Tata Power Renewable Energy said it has signed share purchase agreement to buy Welspun Renewable Energy’s 1.1 GW renewable portfolio in what would be the largest solar M&A in the country and also among the largest such renewable buyout in the whole of Asia.
Welspun Renewables is a 100 per cent subsidiary of Welspun Energy which in turn is co-owned by the listed Welspun Enterprises. BK Goenka, chairman Welspun Group and serial entrepreneur Vineet Mittal who is also the Managing Director of the business are the other key shareholders along with a clutch of foreign financial investors.
The company has about 1,140 mw of renewable power projects which includes about 990 mw solar power projects — largest solar projects in the country — and about 150 mw of wind power projects spread across ten states in India. Out of the 1,140 mw renewable portfolio, nearly 1,000 mw of capacity is operational and balance capacity is under advanced stages of implementation.
Even though the financial details of the transaction were not disclosed, sources in the know said, the enterprise value of the Weslpun portfolio is around Rs 1000 crore ($1.4 billion). Tatas are paying Rs 3650 cr as the equity component of the deal. The rest is the debt in the company which Tatas would look to refinance with lender approvals.
Tata Power’s renewable arm currently operates 294 MW of Renewable power capacity and 500 MW of renewable assets are being carved out of Tata Power into TPREL through a court process. In addition, almost 400 MW of solar and wind power projects are under implementation. Thus, TPREL with all these assets, would have renewable assets portfolio of about 2,300 MW making it the largest renewable power company in India.
ET was first to break it a month ago: Tata Power set to buy Welspun’s wind, solar assets valued at $1.45 billion
Investment banks Barclays and JM Financial are the financial advisors to the deal. KPMG India Private Limited was the Accounting & Tax Advisor. AZB & Partners acted as the Legal Advisor for this transaction.
Speaking on achieving this milestone, Mr. Anil Sardana, CEO & Managing Director, Tata Power, said, “The Company is pursuing growth in Renewable Energy space to create value for its shareholders through various organic and inorganic growth opportunities.
This acquisition will enable the company to deliver significant value for all stakeholders as most of the assets are revenue generating and operating assets. Tata Power can further enhance value of these assets with its operational experience and financial optimization. The acquisition is also a significant step towards attaining the company’s objective of having non-fossil fuel based capacity up to 30-40% of its total generating capacity”.
The Tata offer has trumped the closest competing proposal from a consortium of IDFC Private Equity and Finnish clean energy multinational Fortum by at least 15-20%, added these sources. The other serious contender in fray was Greenko Group Plc, a Hyderabad based renewable company controlled by GIC, the sovereign wealth fund of Singapore.
The sale process will help Welspun Group free up capital to focus on its core businesses which includes large diameter pipes, home textiles and infrastructure. To deleverage the group balance sheet, it sold its sponge iron making unit to JSW Steel in 2014 and two ready-to-build coal fired power plants to the Adani Group.
In the past, it had also tried to raise funds for its renewable energy business through an IPO, a business trust or even an yield co in the US for its operating assets, but none of those plans fructified which eventually triggered a sale process late last year with a formal mandate given to Barclays to find a buyer. The Welspun sale process had also seen interests from Singapore’s Sembcorp and Spanish utilities major Iberdola. ET in its November 30th edition was the first to report that the business has been put on the block.
Interestingly last October, Welspun Renewables received $617 million in funding through a combination of debt and equity infusion by the promoters, existing and new investors. The existing investors of Welspun Renewables include General Electric Co.’s unit GE Energy Financial Services and the Asian Development Bank. The plan then was to aim at a 5 GW combined capacity between wind and solar projects.
India currently has 22 GWs of ready wind energy and over 5 GW of solar capacity. But the Narendra Modi government has set an ambitious target of setting up 100 GW of solar and 60 GW of wind energy capacity by 2022 to lower the country’s dependence on coal fired electricity.