Greenko

Undertakes a series of acquisitions to drive growth

By Khushboo Goyal

Hyderabad-based Greenko Group is among the leading independent power producers (IPPs) of clean energy projects in India. Founded in 2004, it has since built a total project portfolio of 5 GW of operational and under-construction projects, including renewable as well as thermal assets. It also operates as an intermediate financing company for clean energy project development, and engages in acquisitions like most of the large IPPs today. Since its inception, Greenko has raised funds of around $2 billion towards its organic as well as inorganic growth.

Project portfolio

At the time of its inception, Greenko’s focus was on the biomass and hydropower segments. It forayed into wind power in 2008 and solar power in 2017. The company’s overall operational capacity was about 2.58 GW in September 2018, consisting of 80 operational, four under-construction and 12 projects under active development. Its rich portfolio of assets consists of wind, solar, biomass, hydropower and natural gas projects, spread across 15 states in the country. In October 2018, the company increased its total portfolio to 5 GW with two back-to-back acquisitions. Through these assets, the group generates and sells electricity to state utilities, private customers, and other electricity transmission and trading companies.

Diversification has been a key part of Greenko’s strategy over the years. It is now venturing into energy storage solutions to keep up with the market trends. The company is developing a pumped hydro storage project in Kurnool district, Andhra Pradesh. It is part of a larger integrated renewable energy project being built by Greenko at a cost of $2.2 billion. The 2,750 MW mega project will comprise 1,000 MW of solar energy, 550 MW of wind energy and 1,200 MW of stand-alone pumped storage capacities. The company owns and operates transmission projects to cater to the power evacuation requirements of its generation projects. It has two grid substations sufficient for over 5 GW of capacity, and it also owns and maintains over 500 km of high voltage transmission lines (greater than 110 kV) and over 1,100 km of 33 kV transmission lines.

Recent acquisitions

Acquisitions have been an important part of Greenko’s growth strategy. The company started its operations by acquiring biomass and hydropower plants before venturing into greenfield project development. Its performance till 2016 was driven by organic growth. Post that, it was back in the acquisition game. This can be attributed to its strategy of acquiring well-performing projects instead of adopting an aggressive bidding approach to win greenfield projects at lower tariffs. This points to the company’s growing transition towards inorganic growth, as post competitive bidding sufficient project capacity is unavailable.

To this end, in November 2016, the company completed the acquisition of SunEdison’s 587 MW Indian wind and solar portfolio for $42 million and assumption of project-level debt of $350 million. The enterprise value of this transaction was about $392 million. During 2017-18, the group acquired 100 per cent of the shares and voting interests in Karvy Solar Power Limited, New Era Enviro Ventures (Mahbubnagar) Private Limited, Premier Photovoltaic Medak Private Limited, Pennar Renewables Private Limited, Proeco Energy Private Limited, Saimeg Infrastructure (Mahbubnagar) Private Limited and Sharp Cleantech Infra Private Limited from different developers. In October 2018, Greenko Energy Holdings acquired Skeiron Green Renewables’ 385 MW of wind power projects from Tanti Holdings Private Limited, AEP II Holdings Pte Limited and Golden Slam India Investments Private Limited at an enterprise value of about $0.5 billion. The deal added approximately $200 million to Greenko’s earnings before interest, taxes, depreciation and amortisation after the completion of one year post closure. In the same month, the company acquired Orange Renewable India’s 907 MW of operational and under-development solar and wind power projects from AT Holdings Pte Limited at an approximate enterprise value of $1.02 billion. This includes a $680 million debt, which will be taken over by Greenko from Orange, and an equity infusion of $340 million.

Shareholders and key backers

Greenko, with its holding company Greenko Energy Holdings, went public in November 2007 by listing its shares on the Alternative Investment Market of the London Stock Exchange. However, the company decided to delist due to unsatisfactory share pricing. It completed its delisting process in 2016, with the Government of Singapore Investment Corporation (GIC) and Greenko Energy Ventures together buying all the publicly traded shares. In November 2017, Greenko raised Rs 30 billion through the sale of onshore rupee-denominated bonds set to mature in 2027. The sale was made through Greenko’s special purpose vehicles (SPVs) operating solar projects in India, with JP Morgan Chase arranging the offering for these SPVs.

In June 2018, Greenko Energy Holdings signed an agreement for raising equity amounting to $447 million from an affiliate of GIC and a wholly owned entity of the Abu Dhabi Investment Authority (ADIA). Under the agreement, GIC invested $316.1 million, ADIA invested $79.3 million and Greenko Ventures Limited invested $52 million. Post this round of investment, GIC continued to maintain its majority stake in the Greenko Group. As of September 2018, GIC was the majority shareholder in the company with a total stake of 65 per cent. Greenko Ventures Limited and ADIA had a stake of 24 per cent and 15 per cent respectively. In March 2019, Greenko signed an agreement with Siemens Financial Services (SFS), the financing arm of Siemens AG, for an equity investment in its 200 MW Poovani wind power project. SFS agreed to take a 46 per cent equity stake in the wind project.

Outlook

Supported by enabling policies and regulations, advanced technology development and competitive tariffs suitable for discoms, large renewable energy IPPs are likely to witness high growth rates in the future. Greenko is well placed in India’s renewable energy space, with high revenue visibility of projects due to long-term  power purchase agreement (PPA), a healthy liquidity profile and deep-pocketed stakeholders. Greenko earned a profit of $32.9 million in 2017-18 compared to $28.3 million in 2016-17, an increase of 16 per cent. Its revenues increased by a significant margin of 65 per cent during this time. On comparing the half-yearly results from March to September 2017 and March to September 2018, it was found that Greenko’s revenues and profits had increased by 33.57 per cent and 1,331.55 per cent, respectively, in a span of one year.

However, going forward, the company’s expansion plans might get impacted by transmission and land constraints in the sector, vulnerability of cash flows due to variation in weather conditions and risks related to regulatory uncertainties. Moreover, hyper competition in the solar and wind power segments has reduced its ability to win greenfield projects. To tackle this and safeguard itself from future risks, Greenko is relying on a combination of organic and inorganic growth for its expansion. Its back-to-back acquisition of successful projects will sustain its growth plans. Meanwhile, it is investing heavily in energy storage projects to further diversify its portfolio and stay ahead in the game. With a strong focus on building another 5 GW of integrated renewables for round-the-clock supply, the outlook is certainly positive for this multi-gigawatt IPP.

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