Shell’s green play: Interest heats up for Sprng Energy's 1GW assets

A high-stakes sale is underway in India’s burgeoning renewable energy sector as Shell Plc explores the sale of 1 gigawatt (GW) of operational assets from its Sprng Energy unit. According to two people familiar with the matter, the energy giant is fielding interest from global and domestic entities, including ArcelorMittal, Singapore's Sembcorp Industries Ltd, the Canada Pension Plan Investment Board (CPPIB), and JSW Neo Energy.

HSBC is running the sale process for the deal, which has an equity and enterprise value of $350 million and $1.1 billion, respectively, the people cited above said.

Shell acquired Sprng Energy from Actis LLP in 2022 at an enterprise value of $1.55 billion. At that time, Sprng Energy had 2.1 GW of operational renewable energy projects and 7.5 GW in the pipeline, and it has added 800 megawatts (MW) more since then. Notably, CPPIB, Sembcorp, and ArcelorMittal had conducted due diligence on Sprng Energy during the Shell-Actis transaction.

Mint had reported that Shell Plc was looking to sell a stake in the operational assets of Sprng Energy group, and engaged Ambit Group for a valuation exercise.

Shell’s energy recalibration

Last June, Shell unveiled a “balanced energy transition" strategy under chief executive Wael Sawan, focusing on maintaining its leadership in the global liquefied natural gas (LNG) market while “stabilizing liquids production to 2030."

In an emailed response, a Shell Group spokesperson stated, “We don’t have any further comments beyond what we have earlier stated."

“As stated at Capital Markets Day in June 2023, we are working to grow our renewables portfolio as part of an integrated power business in the key market of India. To be clear, there is no strategic review of Sprng Energy group. We continue to develop new projects under Sprng," the spokesperson emphasized. "In line with our Capital Markets Day guidance, we explore opportunities to work with investors who want to deploy capital on de-risked operational assets. This focus on capital discipline will enable Shell to further accelerate growth of our renewables portfolio."

Spokespersons for HSBC and CPPIB declined to comment.

Other major green energy companies in India including ReNew Energy Global Plc have also adopted capital recycling strategies, selling operational clean energy capacity to reinvest in new projects.

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Queries to representatives from ArcelorMittal, Sembcorp, JSW Group, and Ambit Group went unanswered.

Key contenders and their green strategies

ArcelorMittal’s interest in the deal aligns with its strategy to reduce its carbon footprint in response to the European Union's Carbon Border Adjustment Mechanism (CBAM), which will tax the ‘embedded carbon’ in imports of emission-intensive goods such as steel and aluminium. ArcelorMittal has already announced a $600 million investment in a 975 MW renewable energy project in Andhra Pradesh through a partnership with Greenko Group.

JSW Neo Energy, meanwhile, has been active in the Indian clean energy market. The company acquired 1.75 GW of renewable energy projects from Mytrah Energy for an enterprise value of ₹10,530 crore and is among firms that has signed non-disclosure agreements to acquire O2 Power, a renewable energy platform in India, in a deal having an equity value of around $1 billion. JSW Neo Energy has also submitted a non-binding offer for a significant majority stake in Ayana Renewable Power Pvt. Ltd, which could lead to a full acquisition at an equity valuation of around $800 million. The company’s generation portfolio totals 13.6 GW, with 2.6 GW under construction.

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Sembcorp, listed on the Singapore Exchange, is also pursuing an aggressive green energy strategy in India. The company is among the bidders for Brookfield Renewable’s 1.6 GW portfolio in India, which could be valued at around $800 million. Sembcorp has also been in discussions with NASDAQ-listed ReNew Energy Global Plc to acquire solar projects totalling 350 MW.

CPPIB, known for its patient capital approach, is an investor in ReNew Energy Global Plc and has shown interest in other clean energy assets. The Canadian pension fund is also one of the final bidders for National Investment and Infrastructure Fund’s (NIIF) Athaang Infrastructure, a road platform with an equity value of around ₹4,000 crore.

Shell, which employs around 10,000 people in India, operates an LNG terminal at Hazira on the country’s west coast and has 350 fuel retail stations across eight states. In 2022, the company launched its electric vehicle (EV) charging service, Shell Recharge. Through its New Energies division, established in 2016, Shell has invested in Indian new energy companies such as Husk Power, d.light, Orb Energy, and Cleantech Solar, as part of its goal to become a profitable net-zero emissions energy business by 2050.

Also read | The energy firm in sights of a global consortium

India’s renewable energy capacity stands at 180.79 GW, with 73.31 GW from solar and 44.73 GW from wind. The government aims to add 50 GW of green energy capacity annually to reach 500 GW by 2030, driving significant deal activity in the sector, as previously reported by Mint.