IDFC Alternatives fund may buy 275MW solar assets from ACME

Deal may close in stages as IDFC Alternatives needs nod from lenders and other approvals as per power purchase pact


IDFC Alternatives is looking to create a platform of renewable energy assets, a strategy it has used for its portfolio of road assets.
IDFC Alternatives is looking to create a platform of renewable energy assets, a strategy it has used for its portfolio of road assets.

Mumbai: ACME Solar will sell about 275 megawatts (MW) of its operational solar assets to an infrastructure fund of asset manager IDFC Alternatives, two people with direct knowledge of the deal said.

The deal is likely to close in the next two months, the people said.

“The deal will close in stages as IDFC Alternatives will need separate approvals from the lenders of the various assets and other approvals as per the power purchase agreements (PPAs),” said one of the people cited above asking not to be named as the discussions are private.

Mint could not ascertain the valuation at which the deal would be struck.

IDFC Alternatives declined to comment specifically on a possible deal with ACME.

“We are looking at buying a chunk of capacity in the solar sector. We are in advance discussions to buy 200-300MW of solar capacity. We will look for acquisitions and then form an operating company in renewables. I cannot disclose specific details,” said M.K. Sinha, managing partner and chief executive, IDFC Alternatives.

The company is looking to create a platform of renewable energy assets, a strategy it has used for its portfolio of road assets, Sinha said.

Nikhil Dhingra, chief financial officer at ACME Solar, however, said the company was not in talks to sell assets. An email query sent to a spokeswoman at ACME Cleantech Solutions remained unanswered.

ACME Solar has a portfolio of about 1.5 gigawatts (GW) of solar capacity, of which about 400MW is operational. ACME Solar is a part of ACME Cleantech Solutions Pvt. Ltd, the renewable energy unit of the ACME Group.

French renewable energy firm EDF Energies Nouvelles, a unit of French state-run electricity utility Électricité de France SA, and natural resources saving group Eren Groupe of Luxembourg each own a 25% stake in ACME Cleantech Solutions.

ACME has solar projects in states including Punjab, Andhra Pradesh, Rajasthan and Tamil Nadu. It had a target to generate 7,500MW in total capacity by 2017, according to its website.

Merger and acquisition (M&A) activity in the renewable energy sector, especially in the solar sector, has been on the rise with the entry of global clean energy firms and financial investors including pension funds and sovereign wealth funds. The year 2015 saw 14 M&A deals in the renewable energy sector, including hydropower projects, worth $2.27 billion, according to data from Venture Intelligence, a research service focused on private company financials, transactions and valuations.

On Sunday, power producer Tata Power Co. Ltd said it would buy clean energy firm Welspun Renewables Energy Pvt. Ltd in a $1.38 billion deal, making it the largest transaction in the country’s renewables sector.

Investor interest is also being driven by Prime Minister Narendra Modi’s aggressive push for renewables to fight climate change, setting an ambitious target of increasing clean energy capacity more than fivefold to 175GW by 2022. Of this, around 100GW is to come from solar power. “There is interest in the renewable sector in India, given the growth prospects, government support, scalability and build out in shorter time frame and no fuel-supply risk... There is a huge need for capital to fund the renewable growth and the interest from overseas investors remains strong, too,” said Sawan Kumar, executive director, UBS Investment Bank.

IDFC Alternatives operates under three verticals: private equity, a domestic real estate fund and two infrastructure equity funds. It has set up renewable energy firm Green Infra in April 2008, which it sold to SembCorp Industries Ltd in 2015.

IDFC Alternatives, whose parent IDFC Ltd is an infrastructure-focused lender, is an active investor in Indian infrastructure along with others like I Squared Capital and Canada’s Brookfield Asset Management, Australia’s Macquarie Group and new investors including Dutch pension fund APG Asset Management, Canadian pension funds CPPIB, PSP Investments and CDPQ.

In 2014, IDFC Alternatives’ India Infrastructure fund had raised Rs.5,500 crore to invest in power generation, renewable energy, roads, ports and airports. As on 2015-end, the fund still had about Rs.4,000 crore left to invest, which it plans to deploy this over the next 18 months.

Across its infrastructure funds, IDFC Alternatives has assets under management aggregating $1.8 billion.

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