Key Financings: Major debt and equity deals in 2022

India has set a target of deploying 500 GW of non-fossil fuel-based energy by 2030. According to the 21st report of the Standing Committee on Energy (2021-2022), India requires an additional investment of about Rs 17 trillion, including ass­ociated transmission costs, to meet its long-term energy commitments. At present, there is a huge gap between the re­quir­ed investment vis-à-vis the actual in­vestment per annum.

Globally, the Indian renewable energy ma­rket is poised to be one of the most attractive markets for investment. During 2021-22, investments in the renewable energy sector witnessed an increase of 125 per cent over those in the previous fi­nancial year, given the country’s transparent competitive bidding framework, bank­able power purchase agreements and po­licy and regulatory environment ac­­­c­or­ding to the Institute for Energy Eco­no­mi­cs and Financial Analysis.

Over the past 12 months, the sector has increasingly attracted investments in the form of equity, debt, mergers and acquisitions, and issuance of bonds. Renewable Watch highlights major debt and equity deals and other key developments in the industry over this period…

Equity deals

• In December 2021, the Virescent Re­ne­w­­able Energy Trust (VRET), a platform es­tablished by global investment firm KKR to purchase renewable energy as­sets in India, acquired a 49 MW solar portfolio from five special purpose vehicles (SPVs) of Focal Energy for Rs 3.54 billion. Globus Steel and Power, Focal Energy Solar One India, Focal Energy Solar India and SunBorne Energy Raja­sthan Solar will all be 100 per cent ow­ned by Virescent. In addition, Virescent acqui­red 66 per cent stake in Focal Energy Solar Three India through indirect acquisition method.
• In January 2022, ReNew Power sold 138 MWp of its distributed rooftop solar portfolio to Fourth Partner Energy for Rs 6.72 billion, given ReNew’s increasing fo­cus on utility-scale projects. Reliance New Energy Solar Limited (RNESL), a wholly-owned subsidiary of Reliance Industries Limited (RIL), also entered in­to a definitive agreement to acquire Fa­ra­dion Limited’s entire shareholding for £100 million. RNESL will deploy Fa­ra­dion’s sodium-ion technology for its projected fully integrated energy storage gigafactory in Jamnagar.
• In February 2022, NTPC Vidyut Vyapar Ni­gam, a wholly-owned subsidiary of NTPC Limited, acquired a 5 per cent st­a­ke in Power Exchange of India Limited. Godawari Green Energy Limited (GGEL) also signed a share purchase ag­reement worth Rs 6.65 billion with VRET for the sale of its 50 MW solar th­ermal power facility.
• In the same month, pharmaceutical co­mpany Cipla signed an agreement to acquire nearly 32.49 per cent of AMP Energy Green Eleven with an aim to establish a solar power facility in Maha­rashtra. Moreover, Torrent Power Limit­ed entered into a share purchase ag­ree­ment with Blue Diamond Proper­ties and Balrampur Chini Mills to acquire 100 per cent of the equity share capital of Visual Percept Solar Projects, an SPV, with an estimated purchase price of Rs 1.63 billion.
• In March 2022, Bharti Airtel acquired a 9 per cent stake in Avaada Clean TN Project, an SPV fo­unded for the purpo­se of owning and op­erating captive power plants, for about Rs 78.8 million in an all-cash de­al. In other develop­me­n­ts, Waaree En­er­gies also received ap­p­roval from the National Company Law Tribunal to ac­qu­ire domestic solar manufacturer In­dosolar Limited, while Torr­ent Power co­mpleted the acquisition of a 50 MW so­lar project in Maharashtra owned by the UK-based developer Lightsource BP, at an enterprise value of about Rs 3 billion.
• In April 2022, Mitsui & Co Limited ac­quired a 49 per cent stake in ReNew Po­wer’s 400 MW round-the-clock renew­able energy project. The financial de­tails of the acquisition were not disclosed.
• During the same period, Tata Power en­tered into a contractual agreement with a consortium led by BlackRock Re­al As­sets, which includes Mubadala In­ve­stment Company, to invest in Tata Po­w­er Renewable Energy Limited (TPREL), a subsidiary of Tata Power. BlackRock Real Assets and Mubadala invested Rs 40 billion for a 10.53 per cent stake in TPREL in the form of equity/compulsorily convertible instruments, corresponding to a base equity valuation of Rs 340 billion.
• In another significant deal, in May 2022, Shell Overseas Investment B.V., a wholly-owned subsidiary of Shell plc, ac­­q­uir­ed 100 per cent stake in Sole­n­e­r­gi Po­wer Private Limited and the Sprng En­ergy group of companies from Actis Solenergi Limited at $1.55 billion.
• In June 2022, Biocon Limited announ­ced its plan to acquire a 26 per cent sh­are in AMPYR Renewable Energy Re­sources Eleven Private Limited (AREREPL) for Rs 75 million. Further, Tech Ma­hin­dra, ag­reed to purchase a 26 per cent share in Huoban Energy 6, a wholly owned subsidiary of Fourth Partner En­­ergy, for Rs 16 million.
• GE Energy Financial Services acquired a 49 per cent stake in Continuum’s 148.5 MW Morjar onshore wind project in Gujarat in June.
• In July 2022, Mahindra CIE Automotive purchased a 26 per cent share in Stro­n­gsun Solar to obtain power from two captive solar power plants. The acquisition was roughly valued at Rs 33.5 million. Further, Hindalco Industries acquir­ed a 26 per cent share in Cleanwin En­ergy SIX’s 5 MW captive open access wind project at a cost of Rs 7.15 million.
• In the same month, Syngene Interna­tio­nal agreed to buy a 26 per cent share in AREREPL to purchase power from a 50 MW open access solar project in Ko­ppal district, Karnataka.
• In August 2022, Torrent Power announc­ed the acquisition of a 100 per cent sta­ke in Wind Two Renergy Private Limited from Inox Green Energy Services for Rs 325.1 million.
• Among the biggest deals of the year, the JSW Group signed an agreement in August 2022 to acquire renewable energy company Mytrah Energy India in a deal estimated at $1.8 billion-$2 billion.
• In September 2022, Ontario Teachers pu­rchased a 30 per cent equity stake in Mahindra Susten for Rs 23.71 billion. RIL also signed definitive agreements to ob­tain a significant stake in SenseHawk for a total transaction value of $32 million.
• In other developments in September 2022, Hindustan Zinc also acquired a 26 per cent stake in Serentica Renew­ables India, an SPV for Rs 3.5 billion.
• Kohlberg Kravis Roberts and the Hero Group also signed definitive agreeme­nts to invest $450 million in Hero Future Energies in September 2022.
• In November 2022, KKR signed agreements to invest $400 million in decarbo­nisation platform Serentica Rene­wab­les.

Debt deals

• December 2021 saw several debt deals. The US International Develop­me­nt Finance Corporation approved up to $500 million in debt financing for Fi­r­st Solar to drive the company’s ventures in India including a vertically integrated solar PV module manufacturing facility in Tamil Nadu. Further, RIL secu­red a $736 million green loan to fund its lar­gest foreign acquisition, REC Solar Holdings in Norway.
• In the same month, CleanMax received $34 million in funding from the Danish In­vestment Fund for Developing Coun­tries. Furthermore, Rural Electrification Corporation Limited signed an agreement with KfW Development Bank for availing an official development assistance term loan of $169.5 million under the Indo-German Bilateral Partnership.
• In February 2022, SunSource Energy en­tered into a project financing agreement with SunFunder, an international solar finance company, to enable its gr­o­wth in Southeast Asia.
• In March 2022, the International Finan­ce Corporation announced the financing of a 600 MW solar power park ex­pec­ted to come up in Uttar Pradesh. TUSCO, a joint venture between THDC India and the Uttar Pradesh New and Renewable Energy Development Agen­cy, will be in charge of infrastructure de­velopment. The company will receive up to $26,800 per MW in funding.
• During the same month, Adani Green Energy Limited raised a $288 million fa­cility for its under-construction renewab­le asset portfolio through definitive ag­reements signed with a group of lea­d­ing international lenders including BNP Paribas, Coöperatieve Rabobank U.A., Intesa Sanpaolo S.p.A., MUFG Ba­­nk Li­mi­ted, Societe Generale, Stan­d­ard Ch­artered Bank and Sumitomo Mitsui Banking Corporation.
• In May 2022, IREDA disbursed Rs 100.18 billion in loans for renewable en­ergy projects across Maharashtra.
• In July 2022, Continuum Green Energy secured $350 million from two institutional investors for funding the growth of its clean energy projects.
• In August 2022, Greenko secured a Rs 55 billion loan from the Power Finance Corporation, to construct a river energy storage project in Andhra Pradesh. In the same period, ReNew Power entered into an external commercial borrowing project finance loan agreement worth $1 billion with 12 international lenders led by Rabobank.
• In October 2022, Orb Energy, a vertically integrated provider of solar energy solutions in India, announced that it has received a $20 million follow-on loan from the US International De­ve­lo­pment Finance Corporation to support its in-house financing facility for roof­top- and ground-mounted solar customers in India.

Green bonds

Green bonds are increasingly being used as a source of finance by many leading In­dian renewable energy developers. This year 2021 saw the highest capital raised by re­new­able companies using green bon­ds. In 2022 as well many developers rais­ed ca­pital in the international as well as do­mes­tic markets through green bonds.

In January 2022, India Clean Energy Hol­dings, a wholly-owned subsidiary of Re­New Energy Global, raised $400 million by issuing senior secured dollar notes at a rate of 4.5 per cent. The funds will be uti­lised by the company’s subsidiary to re­str­ucture the current high-cost debt and fund capital expenditure in renewable en­ergy assets, among other things. In Fe­b­ruary 2022, VRET raised Rs 6.5 billion through a domestic bond issuance that in­cluded tranches of 7.33 years (Rs 1.5 billion) and 10 years (Rs 5 billion). Following this, Avaada Energy, in March 2022, announced that it will raise Rs 14.4 billion in green bonds in the Indian capital market at a rate of 6.75 per cent, making it the country’s largest AAA-rated gr­een bond by any renewable energy deve­loper. Meanwhile, in April 2022, Greenko Wind raised $750 million for an energy storage plant in Andhra Pradesh through a global bond offering. Following the start of roadshows, the company was able to secure a pricing of 5.5 per cent for its green bond offering.

Other key developments

Several commitments were made by manufacturers, developers and financiers of renewable energy to drive growth in the sector. In January 2022, EverSource Ca­pi­tal announced the close of the Green Growth Equity Fund, reportedly India’s lar­gest climate impact fund, at $741 milli-on. The Indian Railway Finance Corpo­ration, the financial arm of Indian Rail­wa­ys, also issued $500 million of denominated, se­nior and unsecured green no­tes. The gr­een notes will be issued with a 10-year maturity and a coupon rate of 3.57 per cent.

In June 2022, the Hinduja Group, accompanied by Caterpillar Venture Capital, Me­r­curia, Our Crowd and Volvo Energy, in­ves­ted $18.45 million in Connected Ener­gy, a second-life battery energy storage co­mpany.  Further, META4, located in the UAE, announced that it will invest Rs 2.5 billion. JSW Steel allocated Rs 100 billion for targeted investments to reduce the co­mpany’s carbon footprint. The company plans to gradually replace its thermal po­w­er use with renewables. HSBC also co­mmitted Rs 1.25 billion for green initiatives and energy transition projects in India for a period of five years. Meanwhile, Tata Po­wer signed an MoU with the Tamil Nadu government to invest roughly Rs 30 billion for developing a 4 GW solar cell and solar module manufacturing unit in the state.

More recently, the Adani Group committed an investment of $100 billion over the next decade, primarily in the new energy and digital space including data centres. Waaree Energies Limited also recently raised Rs 10 billion in primary funding from various investors.

The recent macroeconomic fluctuations have encouraged many players to raise capital through an initial public offering (IPO). In June 2022, Waaree Energies re­ceived approval from the Securities and Exchange Board of India (SEBI) to launch its IPO. Around the same time, Inox Green Energy Services filed new preliminary pa­pers with SEBI to raise Rs 7.4 billion th­rough an IPO. The IPO subscription is ex­pected to open in November 2022. In Aug­u­st 2022, Vikram Solar received approval from SEBI to raise funds through an IPO. The IPO will comprise a fresh issue of up to Rs 15 billion. Suzlon Energy Lim­i­ted also announced the opening of its Rs 12 billion rights issue on October 11, 2022.

Challenges and outlook

To meet India’s clean energy commitment, it is imperative to increase the inflow of domestic and global capital in the renewables sector over the decade. However, there are many impediments to financing in the clean energy sector. The renegotiation of power purchase agreement (PPA) tariffs discovered through competitive biddings and delay in the adoption of PPA tariffs are prominent barriers. Moreover, the financial state of several state discoms is not steady. Many discoms continue to face delays in the payment of energy bills. Land acquisition and clearance constraints are also key concerns for potential and current investors.

Going forward, the inflow of finance in the renewables sector will be dependent on how effectively these constraints are minimised. Innovative and new financing me­chanisms such as green bonds and investment funds may also be explored further. Greater investments are expected to be directed towards emerging segments such as green hydrogen, hybrid projects, offshore wind and battery storage.

By Kasvi Singh