KKR & Co. is looking to sell its maiden renewable energy platform Virescent, which, once completed, will mark the first exit for the private equity major’s inaugural Asia Pacific Infrastructure Fund from India, three people aware of the development said.
KKR began investing in Indian infrastructure in 2019 when it acquired a substantial stake in IndiGrid, a listed infrastructure investment trust, the owner and operator of power transmission assets. Since then, the fund has invested heavily in setting up platforms to house operating renewable and road assets. The infra investments come from its first Asia Pacific Infrastructure Fund that raised $3.9 billion. India makes up a significant part of the fund’s portfolio of investments.
Last month, KKR led a $450 million investment in Hero Future Energies, the renewable energy arm of the Hero Group.
“KKR has hired investment bank JPMorgan to run the sale process, and teasers have already been sent out to prospective buyers. They are targeting pension and sovereign wealth funds, which may be seeking yield-generating infra assets in India, and strategic buyers who may be keen on expanding their existing portfolio in India. This will be their first exit from their infrastructure portfolio in India,” one of the three people said, requesting anonymity.
According to a second person cited above, the proposed sale could fetch KKR an enterprise value of around ₹2,500-3,000 crore for the platform, which has renewable assets worth over 500 megawatts.
“The sale process has just started; so the final value that they are able to fetch could be very different, depending on the demand it generates from suitors. There is a lot of capital chasing infrastructure investments in India, especially in the renewable energy space,” he added.
“India is a big area of focus for KKR’s infrastructure investments, and thus, a good exit will be crucial for their maiden Asia infra fund,” the second person said, also declining to be named.
A spokesperson for KKR declined to comment on the development.
Virescent’s assets are housed under an infrastructure investment trust (InvIT) called Virescent Renewable Energy Trust, the first such InvIT for renewable assets to be set up in India.
The portfolio comprises 499.9 megawatt-peak (MWp) of solar assets, while another 38.3 MWp of assets were under the process of acquisition, according to a note by rating agency Crisil in August. The portfolio has a debt of ₹1,850 crore, the Crisil report said.
“The portfolio benefits from a diversified presence in seven states and at different locations within these states. This reduces generation risk, as reflected in the plant load factor that has consistently exceeded or has been broadly in line with the P90 value at the portfolio level; PLF in FY20 and FY21 was broadly in line with P90 PLF of around 16.5%. The PLF stood at 16.4% in FY22, despite inverter and transformer issues in few assets and lower irradiance, amid heavy rainfall in Maharashtra,” Crisil said.
The rating firm said the power generated from the portfolio is tied up via PPAs (power purchase agreements) with seven counterparties. “Around 90% of the portfolio is covered by PPAs with a pre-determined tariff for a tenure of 25 years. The balance capacity has been tied up for 12 years from the commercial operations date. This provides revenue visibility, minimizes offtake risk and ensures steady cash flow,” the rating agency noted.
In FY22, the portfolio generated operating revenue of ₹357 crore.
India’s renewable energy market is seeing a flurry of activity as investors and corporates seek access to green energy assets.
Mint reported in August that Torrent Power Ltd and Singapore’s Sembcorp Industries Ltd are in fray to buy US PE firm Global Infrastructure Partners’ Indian clean energy platform Vector Green Energy at a valuation of around ₹5,000 crore. The same month, Mint reported that PE firm Actis Llp won the bid to buy Kolkata-based Atha Group’s 400MW solar assets for an equity value of $100 million.