Monetary Moves

Deal activity in the wind power space continues despite Covid-19 crisis

The rapid global spread of Covid-19 has led to uncertainty in the wind power industry, with India being no exception. According to Wood Mackenzie, supply and labour disruptions due to the current lockdown in India could delay 400 MW of projects scheduled for commissioning in 2020, which is a downgrade of over 11 per cent. Another report by Bloomberg New Energy Finance states that India will add only 1.95 GW of wind energy capacity in 2020, which is 24 per cent less than its earlier estimate of 2.56 GW. An indication that India’s wind power installation targets will not be met is that all major turbine manufacturers in the country, including Siemens, Gamesa, Vestas, Inox Wind, GE and LM Wind Power, have halted production. The government has recently allowed opening the facilities, but labour movement and transportation of equipment continue to be restricted. While manufacturing operations and project development activity has slowed down, deal activity in the wind power space is the same. In a month, two Indian entities have sold part of their wind assets and one large manufacturer has exited the market, for reasons other than the Covid-19 crisis.

The first deal pertains to the cash-strapped Infrastructure Leasing and Financial Services selling its 100 per cent stake in IL&FS Wind Power Services Limited (IWPSL) to the Japan-based Orix Corporation for Rs 60.5 million. IWPSL, a wholly owned subsidiary of IL&FS Energy Development Company, is engaged in providing supervisory and management support services to seven operating wind power generating special purpose vehicles (SPVs). The seven SPVs are Lalpur Wind Energy Private Limited, Etesian Urja, Khandke Wind Energy, Ratedi Wind Power, Wind Urja India, Tadas Wind Energy and Kaze Energy.

The second transaction involves Tata Power’s wholly owned subsidiary Khopoli, which completed the sale of its entire stake in Cennergi Private Limited to Exxaro Resources Limited for $84.25 million, along with normal working capital and other adjustments. Cennergi Private Limited was a 50:50 joint venture between Exxaro, a coal producer in South Africa, and Khopoli, a 100 per cent subsidiary of Tata Power. As per the deal, Exxaro will now have full ownership of Cennergi. PraveerSinha, CEO and MD, Tata Power, said, “The proceeds from the sale would be re-invested in emerging areas where there is a huge growth opportunity. The company will focus on renewable power, power distribution and service-led businesses in India, which will bring in greater value and help us align with the emerging consumer needs.” This indicates that the country’s largest renewable IPP, Tata Power, sees a huge opportunity in the Indian renewable power space.

In a significant development, wind turbine manufacturer Senvion GmbH has entered into a binding agreement with a strategic investor to sell Senvion India. The Indian unit currently has 500 MW of manufacturing capacity and the company has stated that it is on track to complete the current orders as per the terms of the existing contract. It is important to mention that this sale is independent of the Covid-19 crisis. Senvion was one of the biggest beneficiaries of the auction regime in the wind energy segment with a formidable order book of 1,000 MW in India as of November 2018. However, the company filed for bankruptcy in Germany in April 2019 and is said to have lost a portion of its Indian orders to other companies. The company stated that the challenging business environment of the wind power segment in India is not the reason for its exit.

“Senvion GmbH has undergone a financial restructuring as per the laws of Germany owing to its financial position,” the company stated. “Post that, it was necessary to find a safe harbour for Senvion India, which was doing very well otherwise.” According to Senvion India CEO and MD, AmitKansal, “The Indian entity makes 85 per cent of its turbines domestically and has created over 1,000 jobs directly and indirectly. We will continue to provide world-class wind energy solutions to projects in India.”

These transactions indicate continued investor interest in the Indian wind power market, despite the slowdown in capacity addition witnessed over the past two years and notwithstanding the crisis brought upon by Covid-19. India is the world’s fourth largest onshore wind market, with 37.5 GW of installed wind capacity as of 2019. Both foreign investors and project developers are keen to tap this market, which targets to reach 60 GW of capacity by 2022.

By Dolly Khattar

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