SoftBank-backed renewable energy firm SBG Cleantech is set to reach out to financial and strategic investors to raise capital to fund its ongoing and pipeline projects in India and the US.
SB Energy, the renewable energy arm of SoftBank, has mandated Bank of America Merrill Lynch and Barclays to help raise $500-$750 million in SBG Cleantech, it’s 80:20 joint venture with Bharti, multiple people aware of the development said.
Formal outreach to potential investors – global utilities, infrastructure-focused PE funds, pension and sovereign wealth funds (SWFs) – will start in the coming weeks, they said.
On offer is the JV’s entire global portfolio, except Japan where SoftBank’s renewable projects are owned by a separate entity.
Confirming the development, a Softbank spokesperson told ET, “SB Energy is exploring potential co-investment partnerships to accelerate growth of its leading renewable energy platform.” Reiterating its commitment to the venture, the person said, “SoftBank is fully committed to its long-term ownership of SB Energy and has no plans to divest the business.”
Mails to Bharti did not generate a response till press time Thursday.
SBG Cleantech predominantly has operating assets in India but also has assets across the US, Latin America and Middle East through acquisitions and bidding.
The company claims to have 7.7-gigawatt pipeline of projects in India and will reach its 20-gigawatt target within the next five years. Currently, as per the management, it has nearly 2 GW operating renewable energy capacity in the country, 2 GW under construction, and additional 3,700 MW under “active development” with contracts in hand.
As on December 2019, the joint ventures partners had made equity financing of $737 million in SBG Cleantech with around $590 million coming from Softbank alone.
Another $1.2 billion of equity was required then for the pipeline and operational projects to get completed.
The latest exercise comes after efforts to on-board a marque investor failed as did plans of a bond issuance said people in the know.
ET had in its January 9 edition reported that SoftBank was in talks with SWFs in the Middle East and Asia, some of whom are limited partners (LPs) of SoftBank Vision Fund, besides Silicon Valley-based technology giants that are big buyers of clean energy for an investment, and was even open to selling a majority stake in the venture. This was part of an ongoing review as parent SoftBank was facing record losses and liquidity pressures.
SB Energy CEO Raman Nanda had at that time told ET, “As part of business strategy, we review all options to raise external capital, including strategic investments, from time to time.” He had insisted there was absolutely no plan to exit the business even as SoftBank founder Masayoshi Son subsequently announced a $40 billion asset sale programme across his technology-telecoms platforms.
People with direct knowledge on the matter said Softbank had then broad-based those conversations and even approached Brookfield and Actis in India. The discussions fell through predominantly on valuation mismatch, they said.
According to industry peers, the company’s near-$1-billion leverage in operating projects could be a handicap in attracting investments. “On an average, the debt-Ebitda ratio of most renewable companies are 5.5 times,” CEO of a rival clean energy firm said on condition of anonymity. “In SB Cleantech’s case, it is around eight times. Their high cost structures could prove to be a challenge.”
HIGH NOON & ECLIPSE
In 2015, amid much fanfare, SoftBank had teamed up with Bharti Enterprises and Taiwan’s Foxconn Technology Group to form a 70:10:20 alliance to build solar and wind parks and subsequently start manufacturing panels in India to promote Prime Minister Narendra Modi’s push for clean energy and Make in India initiatives. Together they were to invest $20 billion over a 10-year period to set up 20,000 MW, or 20 GW, of clean energy projects, subject to certain conditions. Later, Foxconn exited without investing at all and it became a 80:20 venture.
The company’s plan to fix tariffs in dollars by negotiating differentiated dollar power purchase agreements (PPAs) and demand for a central guarantee to buy electricity from its plants did not find favour with the government. This came as a setback to Son’s proposal to invest a staggering $1trillion by 2030.
In India, the company has aggressively chased central government projects participating in auctions by Solar Energy Corporation of India (SECI) and NTPC to bulk its portfolio. It recently won two 600 MW each from state-run NHPC and SECI at Rs 2.55/kwh and Rs 2.50/kwh as renewable prices show a continuous decline. Its partnership with NHPC is aimed at providing affordable, round-the-clock renewable energy in a hybrid combination of solar and hydro.
In the US, too, the company is looking at a gigawatt of solar parks out of the 1.7 GW platform that it acquired in 2019.
The Covid-19 pandemic has impacted rollout plans for most solar players in India, including SBG Cleantech, as supplier shutdowns in China have impacted deadlines.
Source: Economic Times