NEW DELHI: The $1-billion deal involving Greenko’s acquisition of the wind and solar energy assets of Orange Renewables has hit a roadblock and could be shelved, sources familiar with the development said.
The deal would have hoisted Greenko, backed by Singapore’s GIC and Abu Dhabi Investment Authority, to the top league in India’s renewable energy space and made it the country’s second-largest company in the domain, trailing Sumant Sinha-led ReNew Power that has the highest capacity.
If the deal is called off, it would mark a pause in the hectic pace of M&A activity in the renewable energy space, which revved up to a new high recently with Goldman Sachsbacked ReNew Power acquiring renewable assets of Ostro Energy for $1.6 billion.
The deal positioned Re-New as the largest renewable energy firm in India. Its operating portfolio jumped to 4.3 GW of renewable energy projects.
“The Greenko-Orange deal has been put off,” said a source closely involved with the proceedings. Another source said that after the initial agreement, the two sides had time till the end of September to seal the deal, which is now very unlikely.
Sources said Greenko’s board has already raised concerns about the deal this month and that the company is expected to take a call around the end of August.
Greenko, set up in 2006 by Mahesh Kolli and Anil Kumar Chalamalasetty, has been in the limelight in recent years as it raised more than $2 billion through equity and debt and acquired US-based SunEdison’s solar portfolio for $300 million in October 2016.
It has also shown interest in power distribution. Kolli declined to comment on the deal while Orange did not respond to emailed queries and phone calls.
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.
Sources close to the development said Orange’s wind project in Andhra Pradesh could be a stumbling block in the deal. Another source said that Greenko also raised concerns about the holding company of Orange’s assets being regarded as a “core investment company,” which requires it to abide by the Reserve Bank of India’s comprehensive guidelines for such entities.
Owned by Singapore-based AT capital, Orange has an operating portfolio of 750 MW wind and solar assets across five states — Andhra Pradesh, Karnataka, Madhya Pradesh, Rajasthan and Maharashtra. Another 250 MW of assets are in the pipeline.
“Greenko was supposed to buy the holding company which owns all of Orange’s assets, but the talks have cooled down after initial signing of the contract between the two companies,” said another person aware of developments.
Orange Renewables was put on the block almost a year ago and Greenko entered the picture after ReNew Power withdrew following initial talks with the company.
The renewable energy industry in India has been dubbed as a “sunrise industry,” with a number of global investors betting their money in solar and wind power assets.
Consolidation in the sector started with Tata Power buying out Welspun’s solar assets for $1.4 billion in 2016. Another key deal was Hero Future Energy’s takeover of the wind portfolio of LNJ Bhilwara Group for an undisclosed amount last October.
“When it comes to the sector, there are buyers with deep pockets and sellers who have been scaling up their businesses only to sell them off eventually,” said Vinay Rustagi, managing director at renewable energy firm Bridge to India. “They, however, are not able to find out a common ground in terms of corporate governance and valuation of the deal.
That’s the reason why many of these deals are either getting stuck or falling through.”
Rustagi said Orange was one of the larger assets up for sale, and if the deal with Greenko falls through, there won’t be too many options left to explore.
Andhra Pradesh is one of the largest renewable energy states but developers have been facing problems of late in getting payment.
The disputes relate mainly to payment of the generation-based incentive (GBI), which is actually a tariff topup by the ministry of new and renewable energy, and the amount of power that they are willing to buy, Rustagi said.
Source: economictimes.indiatimes
