IL&FS to sell wind portfolio to GAIL in first asset sale since crisis

  • IL&FS has agreed to sell its 874 MW operational wind portfolio to GAIL (India) Ltd for 4,800 crore
  • GAIL’s offer of 4,800 crore implies that the debt of 3,700 crore on the wind power SPVs will be fully paid back

Tanya Thomas
First Published23 Apr 2019
The sale of the wind power assets to GAIL (India) will close in three weeks, says IL&FS.
The sale of the wind power assets to GAIL (India) will close in three weeks, says IL&FS.(Bloomberg)

Mumbai: In its first asset sale since going bust last year, Infrastructure Leasing and Financial Services Ltd (IL&FS) on Monday said it has agreed to sell its 874 megawatts (MW) operational wind energy portfolio to state-run gas utility GAIL (India) Ltd for 4,800 crore. The sale will close in three weeks, IL&FS said in a statement on Monday.

Significantly, GAIL’s offer of 4,800 crore at 100% enterprise valuation implies that the accumulated debt of 3,700 crore on the wind power special purpose vehicles (SPVs) will be fully repaid. The equity value on these assets will be 1,100 crore.

The sale is subject to various approvals, including from a foreign equity partner in the assets and company law tribunals. Another 104 MW of under-construction wind power project, a solar power portfolio of 300MW and renewable energy EPC (engineering, procurement, construction) business will not be part of the deal. A spokesperson for IL&FS said a separate sale process is on for the residual renewable energy businesses.

The sale process kicked off in November with an invitation for expressions of interest (EoIs). Although the wind portfolio received 22 EoIs, there were fewer binding bids. At the end of the bidding process, GAIL emerged as the highest bidder for seven operating wind power plants with a total generation capacity of 874MW at an average tariff of 5 per kilowatt hour (kWh).

The proposal was unanimously approved by the committee of creditors of IL&FS Wind Energy Ltd (IWEL), the majority owner of the SPVs. The company said it is engaged with ORIX Japan, which owns 49% stake in the wind portfolio and has a first right of refusal on the sale if valuation doesn’t match previously agreed expectations.

The sale proceeds, as and when realized by IWEL, will be held in a trust for distribution to the relevant stakeholders, as per the resolution framework filed with the National Company Law Appellate Tribunal, the statement said. A conclusion of the sale process will also be subject to approval of Justice (Retd.) D.K. Jain and the National Company Law Tribunal as per the resolution framework.

With debt of over 1 trillion, the government replaced IL&FS’ previous management with an Uday Kotak-led board of directors to oversee the company’s resolution process. IL&FS is implementing various asset monetization programmes to recover what it can and repay debt. This includes the sale of its securities business, renewable energy assets, roads portfolio and EPC capabilities. So far, binding bids have been received for the securities business and the renewable energy arm, the management had said a few weeks ago, although no buyer has been named.

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