Exit Route

With the recent exit of SB Energy India, the distress owing to the pandemic is beginning to show in the solar segment. Up until now it was believed that the segment was coping well in the wake of the Covid-19 pandemic.

On May 19, 2021, AGEL, part of the Adani Group, signed share purchase agreements for the acquisition of 100 per cent stake in SB Energy India. The share has been purchased from the SoftBank Group (80 per cent) and the Bharti Group (20 per cent). The transaction values SB Energy India at an enterprise valuation of approximately $3.5 billion. The acquisition amounts to SB Energy India’s total renewable energy portfolio of 4,954 MW spread across four states in the country. The total portfolio comprises 4,180 MW (84 per cent), 450 MW (9 per cent) and 324 MW (7 per cent) of utility-scale solar, wind-solar hybrid and wind projects respectively. Of the solar portfolio, 1,400 MW is operational and 3,554 MW is under construction. All projects have power purchase agreements (PPAs) of 25 years with counterparties such as the Solar Energy Corporation of India (SECI), NTPC Limited and NHPC Limited. The transaction is expected to close by August 2021.

According to media reports, SB Energy was earlier in talks with the Canada Pension Plan Investment Board, Canada-based Brookfield Asset Management and Mubadala Investment Co. for stake sale. However, all these talks did not materialise.

Expansion of AGEL

In January 2020, the company set ambitious targets to become the world’s largest solar player by 2025 and later the world’s largest renewable company by 2030.

The company also set a target to have a renewable energy portfolio of 25 GW by 2025 through both organic and inorganic growth and it is slowly inching towards it. Its biggest announcement came in April 2020, when Total, a French oil and gas company, through its subsidiary invested approximately Rs 37.07 billion for a 50 per cent joint venture (JV) partnership with AGEL. At the time, the JV housed 2.148 GW of operating solar projects operating across 11 states in India. Later, in October 2020, another 205 MW of operating solar assets were added to this JV.

There were other important announcements in 2020 as well. In June 2020, SECI gave its formal approval to AGEL, which won the tender to develop solar plants with a cumulative capacity of 8 GW, with a module manufacturing capacity of 2 GW. This would require a total investment of around $6 billion. In early 2021, AGEL’s portfolio grew organically. In January, it commissioned a 25 MW solar plant in Chitrakoot, Uttar Pradesh; a 150 MW solar plant in Kutch, Gujarat; and in February, it commissioned two 50 MW solar plants  in Shahjahanpur district and Budaun district of Uttar Pradesh. Despite these positive developments, AGEL faced major setbacks last year when over 18 GW of solar projects across the country were unable to sign power sale agreements with state discoms. AGEL’s solar projects were also part of this group of projects.

Thus, for a large developer like AGEL that aims to expand its asset base quickly, acquiring assets is logical. Of late, AGEL has taken the inorganic route of expansion, that safeguards it from having to go through the lengthy process of winning a bid. Moreover, in the case of already operational projects, it is saved from the hassle of getting the required approvals and implementing the project. In March 2021, the company announced that it would acquire 75 MW of operational solar assets in Telangana from Sterling and Wilson for Rs 4.46 billion, and a 50 MW operating solar asset in Telangana from Toronto-headquartered SkyPower Global. In the same month, AGEL completed the acquisition of 100 per cent stake in Spinel Energy & Infrastructure from Hindustan Clean Energy and Peridot Power Ventures at an estimated value of Rs 1.33 billion. With this latest acquisition of SB Energy, AGEL will increase its total renewable capacity to 24.3 GW (the capacity includes 4,500 MW of solar power capacity for which a letter of award is awaited) and operating renewable capacity of 4.9 GW.

Exit of SB Energy India

Another company that had huge ambitions for India’s solar segment but had a different destiny was SoftBank. SoftBank’s India plans came into the limelight in 2015, when, along with Foxconn and Bharti Enterprises, it announced a JV to invest $20 billion to develop 20 GW of solar power projects. Through 2016 and 2017, SB Energy was constantly in the news for its aggressive bidding at the Bhadla Solar Park. In October 2018, speaking at the 2nd Global RE-Invest Meet & Expo, Masayoshi Son, SoftBank’s chief executive officer, made an enthusiastic remark of offering to supply free electricity to the International Solar Alliance member countries including India, once its contracts to supply power in these countries expire. In 2018, the company faced its first major setback when there were reports of it being involved in cartelisation in a solar tender.

Despite the setback, it continued to grow. In February 2020, SB energy won 600 MW of capacity at a tariff of Rs 2.50 per kWh in SECI’s 1.2 GW tender for ISTS-connected solar projects across India. And, in April 2020, SB Energy won a capacity of 600 MW, emerging as the largest bidder in NHPC’s 2 GW ISTS-connected solar PV tender at a tariff of 2.55 per kWh. However, the company’s India plans possibly faced a blow when the state governments decided to renegotiate PPAs, leading to huge regulatory hurdles for the company.

Future outlook

India’s renewable energy sector has long been an attractive investment hotspot for large foreign investors with deep pockets and an appetite for high risks. Many business houses that had entered the renewable energy sector in the past few years are now looking to sell their solar portfolios. Thus, lately, equity financing has become the preferred mode of raising finance and experts believe that the recent record lows witnessed in solar bids have also largely been on account of infusion of foreign capital. There is a huge market demand for operational assets owing to pipeline restrictions on account of commissioning delays, and these operational assets attract good valuations. However, if sectoral challenges are not addressed in time, this may not be the case.

The key reasons behind the exit of a multi-GW portfolio company like SB Energy are believed to be policy uncertainty, regulatory decisions made by the state governments and financial distress of discoms. Moreover, the long and tedious process of executing projects due to delays in the signing of PPAs, land acquisition and getting access to adequate transmission facilities has further complicated matters. On the company’s side, initial aggressive bidding in the solar space, over ambitious targets,  the inability to win bids in recent auctions and financial issues of investors may have posed problems. All in all, the exit of SB Energy India – probably the most newsworthy after SunEdison’s departure – may be the start of a worrying trend in India’s renewable energy sector and more such assets could change hands in the near future.


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