O2 Power to buy stake in Hero Future Energies’ Rajasthan SPV3 min read . Updated: 27 Feb 2021, 11:59 AM IST
- This sale is part of transaction for which Hero Future Energies has mandated HSBC to sell 500 MW of pre-construction assets
NEW DELHI: O2 Power, promoted by European alternative asset manager EQT and Temasek, is acquiring a 49% stake in Rahul Munjal-led Hero Future Energies Pvt. Ltd’s special purpose vehicle (SPV)--Clean Solar Power Bhainsada--that is setting up a 250 megawatt (MW) solar capacity in Rajasthan, said two people aware of the development.
The SPV won this project by quoting a tariff of Rs2.53 per unit and has a 25-year power purchase agreement (PPA) with state-run Solar Energy Corporation of India (SECI). An announcement is expected to be made shortly about this sale, that will help O2 Power reach a 1.23-gigawatt (GW) portfolio.
This sale is part of the transaction for which Hero Future Energies has mandated HSBC to sell 500 MW of pre-construction assets. With an installed capacity of 1.7 GW and an additional 1.5GW under construction, Hero Future Energies plans to build a 3.5GW operating portfolio by 2022.
Rahul Munjal, managing director, Hero Future Energies confirmed the development. In response to a direct query about the deal closure date, Munjal said it will be “shortly."
“If we are going to sell, we will sell now. If we don’t sell now, we will continue to build them," Munjal told Mint.
A O2 Power spokesperson declined comment.
O2 Power is a $500 million renewable energy platform in India that is targeting around 5 GW portfolio over the next five years. Founded by former ReNew Power executives—Parag Sharma, Peeyush Mohit, Rakesh Garg and Nimish Agrwal—O2 Power has already bagged a 1 GW portfolio.
“The investment will help O2 Power commission its first project in 2021," said one of the two people cited above requesting anonymity.
Also, HSBC is running the stake sale process for the renewable energy arm of the Hero Group. Hero Future Energies sold 20% stake for $150 million to Masdar, also known as Abu Dhabi Future Energy Co. in November 2019, valuing the New Delhi-based company at $750 million. Also, International Finance Corporation (IFC), part of the World Bank, had invested $125 million in Hero Future in 2017.
India’s green energy deal pace has been witnessing significant traction, given marquee deals such as Goldman Sachs-backed ReNew Power’ proposed merger with Nasdaq-listed special purpose acquisition company (SPAC) RMG Acquisition Corp. II (RMG II), at an enterprise value of around $8 billion, that was announced on Wednesday. ReNew Power may also explore an India listing, as reported by Mint on Friday.
The O2 Power-Hero Future Energies transaction comes at a time when India’s solar power tariffs have touched a record low of Rs1.99 per unit, with the rates expected to decline further. This has resulted in tariff shopping by electricity distribution companies (discoms). The latest case in point being Gujarat cancelling 700 MW solar power generation tenders to winners that includes O2 Power, Global Infrastructure Partners’ Vena Energy, Tata Power, state run SJVNL, and ReNew Power.
There are several potential green energy transactions in the backdrop of India’s growing electricity demand that had hit an all-time high of 189 GW in December.
Some of these deals in the works, as reported by Mint include Thailand’s PTT Group among others interested in buying stake in Avaada Energy, US-based Global Infrastructure Partners exploring an infrastructure investment trust for its Indian green energy platform, Vector Green Energy and Netherlands’ SHV Energy and India’s quasi-sovereign wealth fund National Investment and Infrastructure Fund separately looking to buy a stake in Hyderabad-based Fourth Partner Energy.
Also, Petronas-owned Amplus Energy Solutions Pvt. Ltd is in talks with ReNew Power to acquire its entire solar rooftop portfolio of 140 MW, and Brookfield has signed an exclusivity agreement to buy Mahindra Susten’s engineering, procurement and construction business and 1.2 GW of solar assets. Brookfield, Actis Llp and Edelweiss Infrastructure Yield Plus Fund’s Sekura Energy Ltd have also offered to buy a majority stake in Fortum Oyj’ 500 MW solar projects in India, and state-run NTPC Ltd and SJVN Ltd have bid to buy out PTC India Ltd’s 289MW wind power assets.
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