Private equity firms Actis Llp and Brookfield Asset Management Inc. have emerged among front-runners to buy a majority stake in 500 megawatts (MW) of solar projects in India owned by Finland’s state-controlled power utility Fortum Oyj, said two people aware of the development.
The potential transaction, which is valued at about €500 million, according to one of the two people cited above, may rank it among the largest in India’s green energy space where deal activity has largely remained unaffected by the covid pandemic.
Kotak Investment Banking is running the sale process.
“Earlier, a number of firms including Actis and Brookfield were interested in the stake sale process. Now, Actis and Brookfield are among the serious contenders left,” said the first person cited above requesting anonymity.
Sanjay Aggarwal, MD of Fortum India Pvt. Ltd, declined to comment. Spokespersons for Actis and Brookfield also declined to comment. Queries emailed to a Kotak Investment Banking spokesperson late Wednesday remained unanswered.
The stake sale is part of Fortum’s strategy to take risks early on and eventually monetize a project to raise capital for new ventures. As part of this, Fortum 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%).
Mint reported on 1 June about Actis and Brookfield among companies that have evinced interest in Fortum India’s solar assets. The others were Canada Pension Plan Investment Board, KKR, Macquarie Group, Edelweiss Infrastructure Yield Plus Fund and O2 Power.
Fortum’s plans come at a time when solar power tariffs in the country are expected to fall below ₹2 per unit after touching a record low of ₹2 per kilowatt-hour in a bid conducted by Solar Energy Corp. of India last month.
Fortum will combine projects totalling 500MW under a new platform wherein the new investor will take a significant equity stake. This new platform co-funded by Fortum is expected to develop around 500MW each year in India and overseas.
Fortum is present in electricity, heating and cooling businesses in Nordic and Baltic countries, Russia and Poland. Fortum India’s operation has around 700MW in its solar power project portfolio. It is also setting up a bio-ethanol plant at Numaligarh refinery in Assam, waste to energy, and charging stations for electric vehicles.
India’s green economy has attracted a host of investors, including PE firms, and strategic players. Japan’s Orix Corp. recently invested $980 million in Greenko for a 17% stake—the single-largest foreign clean energy investment in India.
