ReNew Power acquires Ostro Energy for ~100 bn

ReNew Power became the largest renewable energy company in India after it acquired Ostro Energy on Monday.

The deal size is estimated to be

$1.55 billion (~100 billion), the biggest deal in the renewable energy sector.

The deal is funded in a 60:40 equity-debt ratio with the company open to debt refinancing later, according to persons close to the development. Canada Pension Plan Investment Board (CPPIB) had pumped in $247 million to assist ReNew in finalising the deal, the company said. Before this deal, Tata Power Renewables’s acquisition of Welspun Energy was the largest in the sector at ~90 billion.

Actis PE fund-backed Ostro Energy has a capacity of over 1,100 Mw, of which 850 Mw is commissioned.

Its solar and wind projects are spread across Andhra

Pradesh, Karnataka, Telangana, Rajasthan, Madhya Pradesh and Gujarat.

Market sources termed the acquisition a good deal for ReNew, which is backed by leading global private equity investors, as most of the assets had been commissioned with reasonable tariffs.

The company has green energy assets of over 4,500 Mw, which include a commissioned capacity of about 2,800 Mw. With the acquisition, ReNew’s capacity will now exceed 5,600 Mw, of which over 65 per cent is operational. Greenko is the second-largest renewable company with a portfolio of 4,000 Mw, while Tata Power Renewable Energy has a capacity of 2,300 Mw.

ReNew, which has of late stayed out of competitive bidding for solar and wind projects, has been planning to expand its portfolio through the inorganic route. According to market sources, ReNew has been planning an initial public offering for the last two financial years, but the plans have been kept on hold for now.

With the latest round of investment, the CPPIB’s total investment in ReNew has increased to $391 million. “Our additional investment aligns well with the CPPIB’s overall power and renewables strategy, providing greater diversification for the CPP Fund,” said Scott Lawrence, managing director (head of fundamental equities), CPPIB.

As on December 31, the CPPIB’s investments in India totalled $4.97 billion.

Goldman Sachs, the US-based Global Environment Fund, Abu Dhabi Investment Authority, the Asian Development Bank and JERA are investors in ReNew, which has an equity base of $900 million.

ReNew had raised around $475 million through international bonds and ~31.75 billion through masala bonds in 2017. It entered the Indian bond market in 2015 with three issuances of ~4 billion, ~2.80 billion and ~4.51 billion. The following year, it raised another ~10 billion through three issuances.