Fotowatio Renewable may seek a new buyer for India solar business

Fotowatio Renewable Ventures (FRV), the largest Arabian green energy utility, is likely to seek a new buyer for its Indian solar business following delays in the ongoing negotiations with Rahul Munjal’s Hero Future Energies, said three people aware of the development, requesting anonymity.

FRV, owned by Abdul Latif Jameel Energy and Environmental Services, owns a 135 megawatt (MW) solar power project in India.

FRV was awarded the project located in Andhra Pradesh in a reverse auction by state-run Solar Energy Corp. of India (SECI) at a tariff of ₹4.43 per unit.

Mint reported in January that Hero Future Energies was engaged in talks to acquire the FRV solar project.

“The talks with Hero Future have been going on for a long time now. FRV has a challenge regarding structuring of the deal because of taxation related matters. The Indian assets are owned by a foreign entity and, if the sale happens at the foreign entity level, FRV stands to gain benefits on taxes,” said the first person.

FRV has sent out feelers to a few other financial investors to check their interest in acquiring the assets, if talks with Hero Future fail, said the second person.

“It is not that Hero Future is out of the talks. One of the reasons for the delay is that Hero has been exploring the feasibility of various structuring options before acquiring the asset. Fotowatio Renewable Ventures is also trying to gauge the interest of other buyers,” he added.

The sale of the assets could fetch up to ₹1,000 crore.

Email queries to FRV on 23 August did not elicit any response.

“The company would like to maintain its policy of not commenting on rumours except as required by law,” a Hero Future Energies spokesperson said in an emailed response.

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

The Indian renewable energy sector has been witnessing consolidation with small-scale developers looking to sell out due to falling tariff and lack of access to cheap capital to compete with large developers.

Financial investors looking for yield-generating assets have also added to the consolidation.

Mint reported on 1 August that Mahindra Susten, the renewable business arm of the Mahindra group, which is in the process of selling 160MW of solar assets, has received interest from two potential buyers, CLP India and the Piramal group.

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.

Several major M&A deals were also struck in the sector last year. Greenko Group, one of India’s top renewable energy platforms, had bought Orange Renewable from Singapore’s AT Capital Group at an enterprise value of about $1 billion, and another 385MW of renewable assets from Skeiron Renewable Energy.