Greenko eyes Essel Infra’s transmission biz for $1 bn
POWER PLAY Firm looking at transmission biz entry amid low green power tariffs
NEW DELHI: Renewable energy company Greenko Group is in talks with Es s el Infra projects Ltd to acquire its power transmission business for an estimated $1 billion, two people aware of the development said.
Subhash Chandra’s Essel Infraprojects has five transmission projects in its portfolio.
“This will be one of the largest deals in the Indian electricity transmission space,” one of the two people cited above said on condition of anonymity.
Hyderabad-based Greenko Group, backed by Singapore’s sovereign wealth fund GI C Holdings Pte and the Abu Dhabi Investment Authority, is planning to enter the transmission business amid low green energy tariffs in India that will likely squeeze developers’ profit ability.
“Diversifying portfolio, enhancing scale and capabilities, securing cash flows and entry into transmission and distribution which offers tremendous value going forward seems to be driving the deal ,” said Sam bi to sh Mohapatra, partner, power and utilities, PwC India. “As the sector transforms, value pools shift to T&D and behind the meter.”
Transmission projects are considered to be a safer bet, given the annuity nature of the business and risks such as land acquisition, right of way and forest clearance are restricted to the construction stage. Annuity projects are considered safe because they offer a fixed return.
Essel Infraprojects also plans to sell its solar business and has mandated Investec to find a buyer, Mint reported on October 19.
The second of the two people cited earlier, who also declined to be named, said, “Essel wants to exit its transmission projects and has been looking for a buyer.”
Essel Group has presence across green energy, transportation, electricity transmission and distribution, and urban infrastructure. Greenko Group currently has over 3.2 gigawatts (GW) of operating capacity, with plan store ach5GW by 2019. It has been looking at in organic growth to ramp up its portfolio and acquired Sun Edison’s Indian assets at an enterprise value of $392 million in 2016.
Queries emailed to an Essel Group spokesperson on 1 January remained unanswered. The spokesperson didn’t respond to phone calls or to a message left on his cellphone.
While Greenko’s founder, president and joint MD Mahesh Kolli confirmed his firm’s interest in acquiring electricity transmission and distribution assets, he didn’ t specifically comment on the Essel transaction.
“It is part of Greenko’s strategy to invest in transmission and distribution assets,” Kolli said.
Mint reported on October 4 about Greenko’s $750-million equity investment plans for buying power transmission and distribution assets to diversify, given the uncertainties surrounding India’s renewable energy industry.
India registered record low green energy tariffs that will impact project developers’ margins. Wind power tariffs plummeted to ₹2.43 per kilowatt-hour at( kWh) an auction conducted by state-run Gujarat Urja Vikas Nigam Ltd last month, beating the record low solar tariff of ₹2.44 per unit registered in May. Also, lastmonth’s auctions conducted by state-run Solar Energy Corp of India generated winning bids of ₹2.47 and ₹2.48 per unit.
Indian utilities are also hopeful that the Centre’s focus on improving electricity access with the ₹16,320-crore Saubhagya scheme to provide electricity connections to over 40 million families in rural and urban areas by December will help improve electricity demand in the country and drive up consumption.
This, in turn, is expected to boost electricity demand in the country and improve India’s per capita power consumption of around 1,200 kWh, which is among the lowest in the world. According to federal think tank NITI Aayog’s draft national energy policy, this is expected to go up to 2,911 to 2,924 kWh in 2040.