Global utilities and energy companies, pension and infrastructure-focussed funds are among those that have been approached by NTPC as it starts fundraising for its clean energy platform. NTPC’s plans—to first carve out its renewable energy assets into a special purpose vehicle and sell a stake subsequently to raise funds—will form part of the government’s National Monetisation Pipeline (NMP).
Feelers have been sent and preliminary discussions have been held with Abu Dhabi-listed TAQA, Malaysia’s state-owned Petronas, Canadian pension fund CPP Investment Board (CPPIB), Brookfield, KKR & Co. and Copenhagen Infrastructure Partners among others to gauge their interest, said people aware of the development.
ET was the first to report on July 11 that NTPC is looking to raise Rs 5,000 crore by selling a maximum 49% stake in its green energy subsidiary and had appointed SBI Capital Markets as an advisor.
Non-disclosure agreements are getting signed with prospective suitors after NTPC issued an advertisement seeking expressions of interest (EoIs). The exact quantum of the stake sale and the amount to be raised is yet to be finalised.
NTPC told the stock exchanges last month that it plans to hive off 15 of its renewable energy projects into NTPC Green Energy Ltd, a newly formed entity. The assets being separated have a book value of Rs 10,000 crore. Additionally, its 100% stake in NTPC Renewable Energy Ltd is also being transferred to NTPC Green Energy, which will now be the main vehicle for its green energy ambitions. “Use of renewable energy for decarbonisation of power and industry, as well as NTPC’s entry into all areas of non-fossil including civil nuke power, should aid in its transition,” said CLSA analyst Bharat Patel.
NTPC, TAQA, Copenhagen Infrastructure Partners and Petronas didn’t respond to queries. Brookfield, KKR and CPPIB declined to comment.
NTPC has 2.3 GW renewable energy capacity under operation and 3.4 GW being built. It has a target of 15 GW renewable energy capacity by FY26.
However, analysts at Jefferies expect it to reach only 10 GW by that date. It won the most renewable energy bids awarded in FY22 (19%) compared with ReNew Power’s 10%, Tata Power’s 6% and Adani’s 4%. It has also signed a memorandum of understanding to set up ultra-mega solar parks totalling 24 GW, creating enough of a pipeline for it to reach its FY32 goal of 60 GW.
“NTPC’s CMD exuded confidence on improving future profitability while exploring ways to ‘make energy flexible’ by expanding RE footprint,” said Edelweiss Institutional Equities analyst Swarmin Maheshwari. “We understand NTPC is transitioning from conventional power, but not restricting itself to only RE capacities. It is exploring other profitable opportunities as well. Further monetisation of RE assets in FY23E is a key variable to watch out for.”
NTPC is also building India’s biggest 5 MW electrolyser in Madhya Pradesh as a part of its circular economy initiative to capture carbon and convert it into methanol. This facility will be converted from grey to green hydrogen (GH2) with power supply from its 5 MW small hydro and 500 kW rooftop solar units. This alone could make the company become one of the largest exporters of GH2 and green ammonia/methanol in Asia due to its strategic location.
Even though NTPC can offer the assurance that projects will be backed by secured, long-term power sale agreements, renewable energy analysts are of the view that its reluctance to give up control may discourage global investors.
“They are looking at passive investors who will only provide capital. The IRR expectations will not suit many funds, barring the sovereign or pension fund entities or government-backed utilities that are seeking a toehold in India,” said an executive involved on condition of anonymity. “Even if the new investor gets board representation, NTPC will be controlling the show and would want to ideally consolidate the numbers.”
CPPIB, TAQA, Petronas and others are keen to expand their clean energy footprint. CPPIB has been looking at M&A opportunities–SB Energy, Sprng Energy, Tata Power Renewables–but could not close most of them. Petronas spent almost a year negotiating with Tata Power and ReNew for stake purchases without success. Tata eventually sold close to 10% in its arm Tata Power Renewables to BlackRock and Mubadala for Rs 4,000 crore, valuing the renewable energy business at Rs 35,000 crore. Global utility company Shell bought Sprng Energy platform from PE firm Actis for $1.5 billion in April.
Source: Economic Times