Three years after it successfully sold its clean energy platform Ostro Energy, private equity firm Actis set to lsell another such platform, Sprng Energy, for an enterprise valuation of $2.5-$2.75 billion, multiple people aware of the matter said.
The emerging market focused private equity fund has hired Bank of America to run a formal process to find a buyer.
Feelers have been sent to Canadian funds including Brookfield and CPPIB as well as Indian conglomerate Adani Group for the buyout.
The platform currently has an operational portfolio of 1.7 GW (750 MW of solar and 797 MW of wind energy projects) while another 194 MW of solar power projects are under construction.
If the deal materialises, this would be the largest exit by Actis in India after the UK fund sold Ostro Energy to ReNew Power Ventures in 2018 at an enterprise value of $1.5 billion.
Sprng Energy was set up by Actis Fund 4 with equity commitment of $ 450 mn (later increased to $ 475 mn) in March 2017 for investments in the renewable sector in India. Sprng Energy added a portfolio through multiple acquisitions such as 600 megawatt assets from Acme Cleantech for Rs 3,000 crore last year and 194 MW solar energy portfolio of the Shapoorji Pallonji Group in 2019.
The company reported an operating income of Rs 294.7 cr in FY20 from Rs 10.09 cr a year ago.
An email sent to Actis did not elicit any response till the press time.
“As a part of the company’s business growth strategy, we continue to evaluate various viable options. The company, however, doesn’t comment on speculations,” said an Adani Green spokesperson, while spokespersons with Brookfield and CPPIB declined comment.
Sprng Energy will continue to benefit from the demonstrated operating track record as well as the presence of long-term PPAs at cost competitive tariffs with strong counterparties for a major portion of the company’s portfolio on a consolidated basis, rating agency ICRA said in a note in June.
Going forward, the group’s ability to commission the under-construction projects in a timely manner and within budgeted costs while achieving healthy PLF levels for its operational projects would be important from the credit perspective, ICRA said.
The interest from global investors in India’s green energy space has been high in the last couple of years, despite a slowdown in RE capacity addition in FY21. RE capacity addition went down to 7.4 GW in FY21 from 8.7 GW in FY20 amid the execution headwinds due to Covid-19.
India has attracted investments to the tune of Rs 1.32 lakh crore in the renewable energy sector in the past three years since 2017. At present, India’s installed renewable energy capacity is about 95 GW including 40.5 GW of solar power.
The target of 175 gigawatts (GW) of installed renewable energy capacity will likely be achieved in fiscal year 26 alone, compared to the target of reaching it by December 2022, ICRA said.
The RE sector is expected to see investments of Rs 3.5 trillion over the next four years, increasing the share of RE capacity to 34 per cent of the overall installed capacity by March 2025 from 25 per cent as of March 2021 led by the solar power segment.
“A lot of consolidation is likely to happen in the sector as there is overwhelming interest from strategic as well as financial investors into India’s renewable space. Some of those investors are long term players. We have seen massive investment inflow towards this sector during the last 5-7 years and the trend is likely to continue in the near-term,” said Pankaj Bisht, managing partner at Connesso Consulting LLP, a boutique management consulting firm in Delhi.
Multiple other factors are responsible for large scale consolidation, industry observers said. One of the major reasons is land acquisition for greenfield projects, heightened environmental scrutiny, especially to evacuate power through over ground transmission lines in key states like Rajasthan and Gujarat, clearances from different government departments like PGCIL and state electricity boards. States have also reneged on signed power purchase agreements and recent auctions have seen record low tariffs making financial viability of several projects questionable.
“This has significantly impacted the smaller players and also the larger players who had high interest costs,” said Bisht.
