Abu Dhabi’s Masdar to buy minority stake in Hero Future Energies

Abu Dhabi Future Energy Co. PJSC, also known as Masdar, one of the largest developers of renewable energy in West Asia, is picking up a minority stake in Hero Future Energies Pvt. Ltd, a renewable energy company owned by Rahul Munjal of Hero Group.

According to a filing made to the Competition Commission of India (CCI), the offer was approved under the green channel for mergers and acquisitions.

The green channel is a speedier approval route for mergers and acquisitions. Under this process, the combination is deemed to have been approved upon filing the notice in the prescribed format.

The transaction will see Masdar pick up an equity stake in the UK-based entity that controls Hero Future Energies Pvt. Ltd, as well as subscribing to non-voting compulsorily convertible preference shares in the company.

While further details of the transaction could not be ascertained, The Economic Times had reported on 2 October that Masdar may buy a 20% stake in Hero Future Energies for $150 million. While Masdar had appointed BNP Paribas to advise on the transaction, JPMorgan advised Hero Future.

Hero Future has presence across 10 states in India with an operating asset base of approximately 1,200 megawatts (MW) across wind, solar (grid-connected) and rooftop plants. In 2017, it had raised $125 million from International Finance Corp.

The Masdar-Hero deal marks a rare entry of a new growth equity investor in an Indian renewable energy producer in recent times.

The sector has been witnessing consolidation, with lack of low-cost capital forcing small renewable developers to sell assets to bigger platforms funded by financial investors such as private equity, sovereign wealth funds and pension funds.

In August, Essel Infraprojects Ltd, wholly owned by Subhash Chandra’s Essel group, sold its operating portfolio of 205 megawatts (MW) to Adani Green Energy at an enterprise value of ₹1,300 crore.

Mint reported on 26 September that Essel is also in talks with Adani group to sell its remaining solar energy portfolio of around 480MW.

In May, Mint had reported that global energy major Royal Dutch Shell and Norway’s state utility Statkraft and CLP India are in the race to buy Morgan Stanley Infrastructure Partners-owned wind energy platform Continuum Wind Energy.

The previous major fresh equity investment in the renewable sector was seen in February when EverSource Capital and the National Investment and Infrastructure Fund Ltd (NIIF) announced a partnership with the CDC Group, the UK’s development finance institution, to invest $330 million in its renewable energy platform, Ayana Renewable Power.