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Private equity firm Actis Llp has inked an agreement to buy 500 megawatts of solar projects in India owned by Finland’s state-controlled power utility Fortum Oyj for around Euro 280 million, the firms said in a joint statement on Tuesday.

Mint reported on 18 May about the proposed transaction with Actis close to buying Fortum' solar projects. The deal also saw Actis, Canada’s Brookfield Asset Management Inc. and Edelweiss Infrastructure Yield Plus Fund’s Sekura Energy Ltd submitting separate bids.

“Fortum has signed an agreement to divest the 250-MW Pavagada II and the 250-MW Rajasthan solar power plants in India to Actis, a global infrastructure investment firm. The total consideration from the divestment on a debt and cash-free basis, including the effect of deconsolidating of the net debt, is expected to be approximately EUR 280 million, most of which will be recorded during 2021," the statement said.

While Fortum has divested its entire stake in the Pavagada II project, it still retains 51% stake in the Jaisalmer project in Rajasthan as per the regulatory requirements.

The deal with an equity value of around Euro 100 million also involves Actis contributing equity to develop projects in India and overseas along with Fortum.

“The parties have also signed a comprehensive agreement targeting further investments in solar power plants in India," the statement said.

The sale is part of Fortum’s build-operate-transfer business model strategy to take risks early on and eventually monetize a project to raise capital for new ventures. As part of this playbook, Fortum had in June 2018 agreed to sell a 54% stake in 185MW solar projects in India to UK Climate Investments (40%) and Elite Alfred Berg (14%).

“The divestment will be completed, and the capital gain recorded in three tranches; during the second half of 2021 and the first half of 2022," the statement added.

Actis has taken significant bets on India’s green economy and plans to grow its renewable energy platform in India, Sprng Energy, to 2 giga watt (GW) capacity. Actis also plans to invest $850 million to build two green energy platforms for setting up grid-connected solar and wind power parks, and the commercial and industrial (C&I) segment respectively. Actis has been present in this space and had earlier sold Ostro Energy Pvt. Ltd to ReNew Power Ventures in 2018 at an enterprise value of $1.5 billion.

“We can utilise the strong competencies Fortum has gained over the years in solar development and construction, while utilising the financial strength and track record of Actis to realise the investment potential," said Per Langer, executive vice president of Fortum’s City Solutions division in the statement.

Kotak Investment Banking ran the process for the assets that also saw interest from the likes of Canada Pension Plan Investment Board, KKR, Macquarie Group and O2 Power.

“This is an important step for Actis as we further strengthen our presence in India building on our achievements to date," added Mikael Karlsson, partner and head of energy infrastructure at Actis in the statement.

Actis, which invests only in emerging markets, has committed $2.1 billion in the Indian market so far spanning the energy, financial services and real estate sectors.

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