National Investment and Infrastructure Fund (NIIF) has emerged as the frontrunner to acquire Sprng Energy from Shell for nearly $1.7 billion, said people in the know, as India’s quasi-sovereign wealth fund looks to re-enter the clean energy space a year after selling its platform Ayana Renewable Power.
NIIF is in discussions with Temasek, Singapore’s investment fund, to form a consortium ahead of the binding offers, scheduled in the next few days, the people said.
NIIF is competing against Actis, which is also looking to buy Sprng back, besides the Aditya Birla Group, and private equity firm KKR. The four were shortlisted in February after an initial round of screening.
Temasek was the co-sponsor of O2Power with EQT. It however currently lacks a presence in the clean energy segment in India after the sale of O2 Power to JSW Energy. Temasek is a dominant shareholder in Singapore-based Sembcorp Industries, which is present in India and parts of Southeast Asia, including Singapore.
Sprng Energy, the second greenfield platform set up by Actis in India, has a portfolio of under-construction and operational renewable power projects totalling 5 GW capacity. Around 2 GW of that is currently operational. The first, Ostro Energy, was sold to Renew Power along with its 1 GW assets for $1.5 enterprise value in 2018, the largest such transaction in the sector at the time. Shell Group acquired Sprng as part of a global clean energy pivot for $1.55 billion in 2022.
Sprng Energy is a wholly owned entity of Mauritius-based Solenergi Power, which in turn is 100% owned by Shell Overseas Investment BV.
The binding offers, however, are likely to be under the original $2 billion ask. The projects under construction have time and cost overruns and, in some cases, the power purchase agreements (PPAs) may have to be renegotiated. So, most are expecting the bidders to be cautious and submit conditional offers linked to performance-related milestones.
Upon full completion of its pipeline projects, the share of strong counterparties is expected at around 84%.
Shell did not respond to ET’s queries. NIIF was unreachable for comment while Temasek declined to comment.
Barclays is an advisor in the process.
Since 2023, Shell has spent $8 billion on renewables as part of a stated three-year target of between $10 billion and $15 billion of investment in the segment. However, under chief executive Wael Sawan, the UK oil major has been pulling back from renewable power generation and has already said it will not build any new offshore wind farms after many of these projects failed to deliver returns to shareholders.
Besides exiting Sprng Energy, Shell has retreated from major investments in big power generation projects to focus on potentially more lucrative activities such as power trading.
The company has already cut investment and written down its US wind farms by almost $1 billion starting 2025. Shell also walked away from two major floating offshore wind projects off the north-east coast of Scotland in a move that surprised decarbonisation champions. In India, Shell divested its 49% stake in Cleantech Solar to Singapore’s Keppel Ltd for $200 million.
Shell’s diversified business interests in India include selling lubricants and running an LNG terminal at Gujarat’s Hazira port besides operating fuel retail outlets and electric vehicle charging stations.
ET has been reporting since October 8 about the impending transaction. It had reported that Shell’s attempts at a partial sale of Sprng Energy’s assets last April to Edelweiss-backed Sekura Energy and ONGC failed due to a valuation mismatch.
NIIF, with $5 billion of assets under management, has been churning its portfolio. It is in the process of selling its infrastructure NBFC Assem Infrastructure Finance for Rs 4,000 crore to TPG, ET reported on April 6. It also raised a new $750 million second private markets fund that will look to invest indirectly into local companies by backing other private equity and venture capital funds, the firm said earlier this year.
Source: Economic Times