Mumbai: Greenko, backed by Singapore’s GIC and Abu Dhabi Investment Authority, is set to announce its largest acquisition with the purchase of the solar and wind portfolio of Orange Renewables for an enterprise value of about $1 billion, said multiple people with knowledge of the matter.
The formal announcement is expected on Monday. Following the takeover, Greenko and ReNew will be neck and neck in terms of total operating capacity of around 4.3 gigawatts (4,300 megawatts) and ahead of Tata Power, which generated a little over 2 GW from renewable energy.
Orange is owned by Singapore-based AT Capital, a fund that has India-born billionaire Arvind Tiku as its primary sponsor. Based in Russia, Tiku made his fortune in the Central Asian oil and gas industry.
The company was put on the block around a year ago. Investment bank Rothschild represents the sellers. Greenko entered the picture after ReNew withdrew following initial talks. Hero Future Energies, Sembcorp India and PE fund Actis were said to be among the other contenders in the fray.
Orange has 750 MW of operational wind and solar generating plants in five states — Andhra Pradesh, Karnataka, Madhya Pradesh, Rajasthan and Maharashtra. Another 250 MW is under construction. Additionally, the company has permits for another 1GW of projects. Greenko is buying the holding company that owns all the assets.
The average feed in tariff for the operating Orange portfolio is around Rs. 4-5 per unit. Of the 750 MW, 200 MW is solar and the rest is wind. The projects in the pipeline, mostly won through recent wind auctions, have an average tariff of Rs. 2.70 per unit. The projects have turnkey contracts with Gamesa and Suzlon. The solar foray has been more recent with a maiden project in Maharashtra as of now. The equity value of the company is likely to be about $350 million and it has debt of around $650 million.
Hyderabad-based Greenko, which has raised more than $2 billion through equity and debt in the past 18 months, will be funding the acquisition through its internal reserves.
A Greenko spokesperson declined to comment while Orange didn’t respond to queries. ET was the first to report on the impending transaction on March 8.
Greenko acquired the Indian portfolio of SunEdison–once the largest renewables company in the world until it went bankrupt in the US--for about $300 million two years ago. It also attempted an acquisition of Reliance Infrastructure’s electricity distribution business, ET reported in August last year. The Adani Group eventually purchased that business.
Greenko’s operating portfolio is believed to have generated around $400 million EBITDA (earnings before interest, taxes, depreciation, and amortisation) in FY18, likely making it one of the top five private sector owners of power assets across all verticals (coal, renewable and hydro). It aims to clock $700 million in EBITDA in FY19.
Earlier this April, Sumant Sinha-led Re-New Power Ventures finalised the takeover of Ostro Energy for an enterprise value of Rs. 10,200 crore, the biggest M&A deal in the renewables sector.
“We expect activity to continue moving toward clean energy businesses over the next year or two–the trend toward cleaner generation sources is happening and will continue. Specifically, Southeast Asia, China and India will continue their healthy growth into renewable energies and transactions,” said Manuel Santillana, global energy sector deal advisory lead, KPMG.
The rising power demand in India is also being met through increasing the generation from renewables. Total renewable generation improved substantially by 30.8% from the year earlier to 7.5 billion units in February 2018 on account of improved generation from wind and solar sectors, due to higher capacities and marginal improvement in plant load factor (PLF), according to a report by India Ratings.
The renewable sector posted strong capacity additions during FY18, with solar capacity increasing 9.4 GW to 21.7GW from the year earlier. The growth in solar power capacity was due to the competitive bidding prevailing in the sector. Wind capacity addition also increased 1.8GW to 34.0GW in FY18, of which 1.2GW came in the fourth quarter. However, the reluctance of state distribution companies to sign long-term power purchase agreements at higher feed-in tariffs has meant that capacity addition is slowing down.
Renewable energy accounts for 15% of India’s total energy generation capacity of 300 GW, according to the latest government estimates.
Orange founder Tiku has interests in oil and gas, property and renewable energy, held through his private holding outfit AT Holdings. Tiku left India at age 18 to study mechanical engineering in Russia and worked as a commodities trader before branching out on his own in oil and gas in Kazakhstan.
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