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Japan’s SoftBank Group Corp. may retain around 10% stake and board representation in SB Energy Holdings after selling its controlling stake to Canada Pension Plan Investment Board (CPPIB), two people aware of the development said.

SoftBank currently owns 80% in SB Energy, which has a 7.7 gigawatts (GW) solar power portfolio in India. The rest 20% stake is held by Bharti Enterprises Ltd.

The joint venture agreement for the deal, one of the largest green energy transactions in India, is expected to be signed shortly. Once the sale is completed, CPPIB will become the majority owner of SB Energy. Bank of America (BofA) and Barclays are managing the sale process.

CPPIB’s earlier plan was to acquire SoftBank’s entire 80% stake for an estimated $525 million. SoftBank has invested more than $800 million in the business in the past five years. The stake sale efforts follow SB Energy dropping its plan in July last year to raise $600 million through a dollar bond.

Spokespersons for CPPIB, SoftBank Investment Advisers, Bharti Enterprises, Barclays Bank India, and Bank of America declined to comment.

“The deal is expected to be completed by mid-April. SoftBank will retain a stake and will be an active participant in the company," said the first person cited above, who did not want to be named.

“This stake is being retained to serve as security against the performance guarantee given," said the second person mentioned above.

The Economic Times reported on 30 December that currently, 75% of SoftBank’s stake is being transferred to CPPIB and if the conditions precedent (CPs) are not met, SoftBank will transfer a 5% stake that it is temporarily holding as security for free to CPPIB.

CPPIB had placed several pre-conditions for the deal estimated at $520 million, including meeting certain project commissioning deadlines, securing new businesses, achieving land possession from the Andhra Pradesh government and reimbursement of safeguard duty for a project in Rajasthan. Other CPs put by CPPIB before it finalizes one of India’s largest green energy deals include getting the Punjab government on board for buying electricity from a project, a bond issuance as well as SoftBank bearing any future liquidated damages liability.

Mint reported on 6 July 2020 about SoftBank’s plan to sell its entire stake, in a change from its earlier plan to find a ‘significant’ minority investor, and its separate talks with CPPIB, Canada’s Brookfield Asset Management Inc. and Abu Dhabi government’s sovereign wealth fund Mubadala Investment Co. for the sale.

The deal comes in the backdrop of regulatory risks over green energy contracts and their enforcement in Telangana, Gujarat, Andhra Pradesh and Punjab. Also, India’s solar power tariffs have touched a record low of 1.99 per unit at an auction conducted in December by Gujarat Urja Vikas Nigam Ltd. In addition, Chinese solar module makers have raised prices by over a fifth since December.

Despite this, there is a continuing interest among global investors in the domestic renewable energy market, the latest case in point being private equity firm Actis Llp planning to invest $850 million in India to build two green energy platforms.

India is running the world’s largest clean energy programme to achieve 175GW of renewable capacity, including 100GW of solar power by 2022.

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