AIMCo, OMERS, Brookfield eye Fourth Partner Energy deal

The deal involves buying private equity firm TPG Capital’s 52% stake in Hyderabad-based Fourth Partner Energy at an expected enterprise value of around $700 million and a fresh equity investment of $500 million. The suitors have already submitted non-binding offers (NBO) for the transaction run by Bank of America and Investec, the people cited above said on the condition of anonymity.

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Norway’s state-owned investment fund, Norfund, is also an investor in Fourth Partner.

In an earlier interview, Fourth Partner Energy’s co-founder and executive director Vivek Subramanian had said the company plans to raise fresh capital in its next funding round. Mint also reported on 8 November about TPG looking to sell its stake in Fourth Partner.

In response to a query, a Fourth Partner Energy spokesperson said in an emailed response, “Fourth Partner Energy is in the midst of a fund-raising round, and we cannot comment on any specific development at the moment. We have significant expansion targets for India and South East Asia and are on track to achieving the same."

Spokespeople for Bank of America, Brookfield Asset Management Inc., and OMERS declined to comment.

Queries emailed to the spokespersons of AIMCo, I Squared Capital, and Investec early Wednesday morning remained unanswered till press time.

Founded in 2010 as a solar component and engineering, procurement and construction (EPC) firm, Fourth Partner caters to the commercial and industrial segment. Open access allows large electricity users to buy power from the open market instead of depending on a more expensive grid. These projects are generally insulated from risks such as power procurement curtailment and tariff shopping by discoms. Fourth Partner has 1 gigawatt (GW) installed green energy capacity, with operations in Vietnam, Bangladesh and Sri Lanka and plans to reach an installed capacity of 4-5GW in the next five years.

The global investors’ interest in India’s green energy space comes against the backdrop of the ambitious energy transition plans drawn up by the Centre. The government on Wednesday approved a ₹19,744 crore National Hydrogen Mission to produce 5 million tonnes of green hydrogen annually by 2030. The marquee scheme is expected to attract ₹8 trillion in investments by 2030. There are several clean energy deals in play, as reported by Mint, including Ahmedabad-based Torrent Power Ltd’s discussions with ReNew Energy Global Plc to buy 1.1GW of its operational, clean energy capacity at an enterprise value of $1.2 billion. E-commerce giant Amazon is also creating a wind and solar merchant power portfolio to sell on the electricity exchanges.

Some of the major Canadian investors in India are Canada Pension Plan Investment Board (CPPIB), Caisse de dépôt et placement du Québec (CDPQ) and Brookfield Asset Management. OMERS has also bought around 19.36% stake in Azure Power Global Ltd, and others, such as Ontario Teachers’ Pension Plan (Ontario Teachers), have been scouting for opportunities. AIMCo has $168.3 billion of assets under management and has an infrastructure and global renewable portfolio of $11 billion.

Canadian pension funds have been placing significant India bets and represent the so-called patient capital, which seeks modest yields over time.

Canadian pension funds CDPQ Fixed Income XI Inc., Ivanhoe Logistics India Inc., CDPQ Infrastructures Asia III Inc., and OMERS Administration Corp. are among the overseas investors declared by India’s Income tax department as eligible for the tax exemption for infrastructure investments in India under a provision introduced in the Income Tax Act by way of Finance Act 2020.

The relief given under section 10 of the Income Tax Act dealing with earnings not to be included in the taxable income is in effect from 1 April 2021. Some Australian and UK pension funds and several sovereign wealth funds have also been given the same benefit.

Brookfield Asset Management Inc. was earlier also looking to buy a stake in Mahindra Susten Pvt. Ltd, which was finally bought by Ontario Teachers’ Pension Plan. New York-based I Squared Capital is no stranger to India’s green economy and invested $150 million in Amplus Energy Solutions Pvt. Ltd in April 2015.

Amplus was sold to Petronas for ₹2,700 crore and marked Malaysia’s state-run oil and gas company’s global foray into the clean energy space. I Squared Capital is also looking to buy Continuum Green Energy (India) Pvt. Ltd in a deal having an enterprise value of around $1.5 billion. The others in the fray for the Continuum deal are Petronas, Singapore’s Sembcorp Industries Ltd, JSW Neo Energy, global oil major BP Plc, and Norway’s state-run electricity firm Statkraft.

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