Key Financings

Major debt and equity deals

The power sector has witnessed considerable financial activity in the past year, with the focal point being renewables and the resolution of stressed assets. The mergers and acquisitions (M&A) segment indicated a growing trend with international players, global funds and domestic firms acquiring clean energy portfolios in India. Further, in line with the government’s ambitious expansion plans for renewable energy and initiatives such as the Green Energy Corridors project and distribution system strengthening, various loan agreements were signed by domestic majors including NTPC Limited, Power Finance Corporation (PFC), the Rural Electrification Corporation, and Power Grid Corporation of India Limited (Powergrid), as well as multilateral agencies. The equity market saw heightened activity with renewable energy companies looking to tap the capital market through the launch of initial public offerings (IPOs). Meanwhile, with power companies’ mounting debt burden and the Reserve Bank of India’s (RBI) 180-day deadline expiring, a few stressed power assets went into liquidation.

Power Line highlights the major debt and equity deals that took place in the sector over the past 12 months…

Mergers and acquisitions

In the past year, the M&A momentum continued in the power and renewable energy sectors. Some of the key deals of the year were NTPC Limited’s acquisition of power projects from Bihar’s power utilities and ReNew Power’s acquisition of Ostro Energy, one of the biggest renewable energy deals in the year. Meanwhile, Adani Transmission Limited’s (ATL) acquisition of Reliance Infrastructure’s Mumbai distribution business, which was announced last year, was completed in August 2018.

  • In September 2018, European renewable energy generator Statkraft acquired the 100 MW Tidong hydropower project in Himachal Pradesh with 100 per cent stake acquisition from NSL Tidong Power Generation Private Limited. The project is about 60 per cent complete and the remaining construction will resume after the transaction closes. It is expected to be completed in two years and has the possibility of the installed capacity being increased beyond 100 MW.
  • In June 2018, Sprng Energy Private Limited, an Indian renewable energy platform set up by British private equity (PE) firm Actis, finalised a deal to buy solar assets from the Shapoorji Pallonji Group. The deal involves the entire domestic portfolio of Shapoorji Pallonji Infrastructure Capital Company Private Limited.
  • In May 2018, Hinduja Power Corporation acquired Mumbai-based Kiran Energy Solar Power in an all-cash deal. The enterprise value of the deal is estimated at Rs 9 billion-Rs 9.5 billion. The deal was facilitated by the YES Securities’ Sustainable Investment Banking division, the sole adviser for the transaction, and led to the acquisition of 85 MW of operational assets by Hinduja Power. With this transaction, Argonaut Ventures, New Silk Route and Bessemer Venture Partners India – the three PE players that collectively owned 80 per cent stake in Kiran Energy – will exit the company.
  • In May 2018, Larsen & Toubro (L&T) signed a definitive agreement with Schneider Electric for the sale of its electrical and automation business for an all-cash consideration of Rs 140 billion. Schneider Electric has formed a consortium with Singapore’s state investment firm Temasek Holdings, for the proposed deal. Both the consortium partners have decided to infuse fresh investment in the subsidiary. After the completion of the deal, Schneider Electric will hold 65 per cent stake in the company and Temasek will hold the remaining.
  • In April 2018, ReNew Power Ventures Private Limited acquired Ostro Energy Private Limited from Actis Capital for an undisclosed amount. With this acquisition, ReNew Power’s aggregate capacity will increase from 4,500 MW to 5,600 MW. ReNew Power’s existing investor, the Canada Pension Plan Investment Board, made an additional investment of $247 million in ReNew Power to support the acquisition, increasing the combined investment in the company to $391 million. Earlier, in November 2017, ReNew Power Ventures had acquired the wind power assets of the KC Thapar Group for Rs 10 billion.
  • In March 2018, NTPC Limited signed an MoU with the Bihar government and the state’s power utilities for the acquisition of the 720 MW Barauni Thermal Power Station (TPS); the acquisition of Bihar State Power Generation Company Limited’s (BSPGCL) 27.36 per cent equity in Kanti Bijlee Utpadan Nigam Limited (KBUNL), which owns the 610 MW Muzaffarpur TPS; and the acquisition of BSPGCL’s 50 per cent equity in Nabinagar Power Generating Company (NPGC) Private Limited, which is developing the 1,980 MW Nabinagar super thermal power project in Aurangabad district. Following these deals, the Barauni plant has become a part of NTPC’s portfolio while KBUNL and NPGC have become wholly owned subsidiaries of the company.
  • In March 2018, Energy Efficiency Services Limited’s (EESL) subsidiary, EESL Energy Pro Assets Limited, acquired UK-based power generation solutions provider Edina Power Services for $76 million. The acquisition allows EESL to expand its footprint in the UK’s $8.4 billion market for energy efficiency products and services. The deal also helps the company improve its offering on the energy service contract model for combined heat and power technology.
  • In December 2017, ATL signed a definitive binding agreement with Reliance Infrastructure Limited (RInfra) for 100 per cent acquisition of its electricity generation, transmission and distribution businesses in Mumbai. The total deal value is pegged at Rs 132.51 billion. The total consideration value is estimated at Rs 188 billion. The deal was approved by the Competition Commission of India (CCI) in February 2018. Earlier, in November 2017, ATL had acquired the operational transmission assets of the Western Region System Strengthening Scheme (WRSSS) of RInfra for Rs 100 billion. As part of the deal, ATL also acquired 100 per cent stake in Western Region Transmission Maharashtra Limited and Western Region Transmission Gujarat Limited, which have an aggregate transmission network of 3,063 ckt. km.
  • In October 2017, ABB acquired General Electric’s (GE) Industrial Solutions business for $2.6 billion, putting on hold its $3 billion share buyback programme. ABB foresees potential cost synergies of $200 million annually, post five years of the completion of the deal.

Major loan agreements

In the past one year, power sector financing majors PFC and the REC have extended loans and financial assistance across generation, transmission and distribution segments. A key highlight was PFC’s foray into the waste-to-energy (WtE) and sewage segments.

  • In July 2018, NTPC signed a term loan agreement with HDFC Bank for availing of a loan of Rs 15 billion. The loan facility will bear an interest rate linked to the three-month marginal cost of fund-based lending rate of the bank and will be utilised by NTPC Limited for financing a part of its capital expenditure.
  • In June 2018, PFC provided a loan of Rs 2,900 million for the 24 MW Bawana WtE project in Delhi, being operated by the Ramky Group, which marked PFC’s entry into WtE financing. Further, in June 2018, PFC extended an additional financial assistance of Rs 26.26 billion to Rajasthan Rajya Vidyut Utpadan Nigam Limited to support the utility’s effort to comply with the new emission norms. PFC also forayed into the sewage segment in July 2018, by extending a financial assistance of Rs 1.92 billion to Nagpur Waste Management. Earlier, in March 2018, PFC signed MoUs with Uttar Pradesh Rajya Vidyut Utpadan Nigam Limited, Uttar Pradesh Power Transmission Corporation Limited and Uttar Pradesh Power Corporation Limited for providing financial assistance aggregating Rs 50.2 billion to the entities over the next four years. Other major loan agreements by PFC during the year were a loan of Rs 40.09 billion to Telangana State Power Generation Corporation Limited for setting up a 4,000 MW coal-based power plant in Nalgonda district, a Rs 3.09 billion loan to Uttaranchal Jal Vidyut Nigam Limited for the renovation, modernisation and uprating of the 144 MW Chilla hydroelectric project, a Rs 10.2 billion loan to Power Transmission Corporation of Uttarakhand Limited, and a financial assistance of Rs 13.5 billion to Bihar Grid Company Limited for a Rs 16.88 billion project.
  • In June 2018, Azure Power Global Limited received a debt funding of $135 million from the International Finance Corporation (IFC) and three European lenders for the expansion of its rooftop solar unit. IFC will provide a funding of $45 million and the remaining amount will be contributed by Dutch development bank FMO, France’s Proparco, and Austrian development bank OeMB.
  • In March 2018, Powergrid entered into an agreement with the State Bank of India (SBI) for a Rs 50 billion term loan for funding its capital expenditure. Recently, in August 2018, it signed another agreement with SBI for a term loan facility of Rs 100 billion for meeting its capex requirements.
  • In March 2018, the European Investment Bank (EIB) signed a long-term agreement with the Indian Renewable Energy Development Agency (IREDA) worth Euro 150 million to finance clean energy projects in the country. This is the second line of credit extended by EIB to IREDA. The previous line of credit had enabled the development of projects aggregating 600 MW over a span of four years.
  • In March 2018, the government committed $1.4 billion of credit for 27 solar projects in 15 countries at the inaugural conference of the International Solar Alliance (ISA) held on March 11, 2018, in New Delhi. In addition, France has committed Euro 700 million in investment to the ISA, taking the total commitment to Euro 1 billion.
  • In January 2018, IFC invested $440 million in the 750 MW Rewa ultra mega solar park in Madhya Pradesh. The investment has been provided in the form of debt to three companies – Mahindra Renewables Private Limited, the Acme Group and Actis LLP.
  • In February 2018, IREDA and Rewa Ultra Mega Solar Limited signed a sub-loan agreement to finance the shared infrastructure of two solar power projects in Madhya Pradesh. These are the 750 MW Rewa ultra-mega solar park and the 250 MW Mandsaur solar park. Earlier, in October 2017, IREDA signed a Rs 3 billion loan agreement with Reliance Commercial Finance Limited, for the provision of a loan to the latter. The loan will be used to lend to renewable energy and energy efficiency projects.
  • In December 2017, IL&FS Financial Services Limited partnered with Jammu and Kashmir Bank Limited for financing hydropower projects in the state, in a move to end the deadlock for financing hydropower projects in the state. Nine projects, aggregating a capacity of 2,000 MW and which would require funding of Rs 200 billion, have been identified.
  • In December 2017, YES Bank jointly invested $400 million with EIB for financing new solar and wind projects in the country. The investments will mainly be in large-scale utility projects in India, some of which have already been identified in Rajasthan, Telangana, Maharashtra and Karnataka. EIB has provided a 15-year $200 million loan for the initiative and the balance will be supported by YES Bank, project promoters and other financial institutions.
  • In November 2017, seven developers were sanctioned loans of over Rs 23 billion from SBI for financing grid-connected rooftop solar projects aggregating 575 MW. The companies include JSW Energy Limited, Tata Power Renewable Energy Limited and the Adani Group. SBI has availed of credit facilities aggregating $625 million from the World Bank for onlending to such projects.
  • In November 2017, REC and Patratu Vidyut Utpadan Nigam Limited, a subsidiary of NTPC, signed a loan agreement worth Rs 140 billion for setting up the 2,400 MW Patratu Super Thermal Power Project Phase I in Jharkhand. In January 2018, REC, in collaboration with PFC and SBI, secured the letter of award from Nevyeli Uttar Pradesh Power Limited to fund the debt for the 1,980 MW Ghatampur coal-based power station. The consortium will provide a Rs 110.67 billion financial assistance to Neyveli Uttar Pradesh Power Limited for the project, with an estimated cost of Rs 172.37 billion.

Stressed assets

As RBI’s February circular setting a 180-day timeline for banks to resolve large corporate defaults ended in August, a few stressed assets headed to the National Company Law Tribunal (NCLT). Bankers and lenders earlier tried to sell these assets to potential buyers, but the deals could not be finalised owing to a lack of consensus.

  • In September 2018, liquidation proceedings were initiated for Lanco Infratech by the NCLT after the company’s committee of creditors rejected a revised resolution plan from Thriveni Earthmovers. Lanco Infratech has a consolidated debt of over Rs 450 billion from 29 lenders. Recently, another company subsidiary, Lanco Babandh Power Limited, also landed in the NCLT following a petition filed by its lender, ICICI Bank.
  • In August 2018, JSW Energy submitted a revised bid of Rs 62 billion for the debt-laden Prayagraj Power Generation Company Limited. Earlier, Resurgent Power (in which Tata Power holds 26 per cent stake) had been given the go-ahead by Prayagraj’s creditors to acquire a 75 per cent stake in the firm, which submitted a bid of Rs 60 billion.
  • In June 2018, Coastal Energen was put up for sale by a consortium of lenders led by SBI. The company owns a 1,200 MW coal-based power plant in Tamil Nadu and had obtained credit facilities from lenders for it. Edelweiss ARC offered Rs 31 billion for the project.
  • In August 2018, Adani Power emerged as the highest bidder for the KSK Mahanadi project at a deal value of Rs 102.5 billion.
  • In April 2018, Essar Power Jharkhand Limited was admitted for insolvency proceedings by the NCLT. The decision came in the backdrop of a petition filed by ICICI Bank under Section 7 of the Insolvency and Bankruptcy Code (IBC) 2016, for its failure to recover a debt of Rs 30.33 billion from the company. According to ICICI Bank, the total default amount (including interest and other charges) stood at Rs 34.68 billion as of December 15, 2017.
  • In August 2018, a Noida firm, Worlds Window, backed by Exim Industries, put in the highest bid for buying out the Rs 43 billion debt-laden Jhabua Power Limited, and submitted a 10 per cent bank guarantee too. However, the company’s demand to have management control over the project before making the final payment has been blocking the deal.

Bond issues

A number of power sector majors including NTPC Limited, Tata Power, the Greenko Group, PFC and REC tapped the bond market for fundraising during the past 12 months. The largest of these deals was NTPC’s $6 billion (about Rs 400 billion) medium-term note programme listing.

  • In March 2018, REC raised $300 million through dollar bonds. The 10-year Regulation-S bonds were priced at a coupon of rate 4.625 per cent. The bond issuance received an overwhelming response with an order book of over $900 million. Earlier, in December 2017, it raised an additional $400 million through the issuance of dollar bonds on the London Stock Exchange.
  • In January 2018, ReNew Power Ventures Private Limited raised Rs 22.35 billion through non-convertible debentures (NCDs) for the repayment of its existing loans. The issuance was undertaken in two parts, the first comprising credit-enhanced NCDs worth Rs 7.6 billion, and second, a multi-issuer cross-collateralised rupee bond involving multiple power distribution companies, valued at Rs 14.75 billion.
  • In January 2018, NTPC listed its $6 billion medium-term note programme on the India International Exchange at the International Financial Services Centre in Gujarat. With this, NTPC became India’s first quasi-sovereign company to list on the exchange. The listing was done on January 24, 2018 on the Global Securities Market of the exchange.
  • In November 2017, the Greenko Group raised Rs 30 billion from 10-year rupee-denominated bonds. The bond offers a semi-annual interest rate of 8.75 per cent. The bonds were sold through special purpose vehicles (SPVs) that will develop and operate a 500 MW solar PV project at the Kurnool solar park in Andhra Pradesh.
  • In November 2017, PFC raised $400 million through the issuance of 10-year green bonds on the London Stock Exchange. This was the company’s maiden green bond issue and the funds raised were earmarked for the promotion of renewable energy in the country. The bond had a fixed coupon rate of 3.75 per cent and is Climate Bonds Initiative certified.
  • In September 2017, Tata Power’s wholly owned subsidiary, Coastal Gujarat Power Limited, raised Rs 27 billion via the issuance of NCDs on a private placement basis. The NCDs were issued in two series – the Series I NCDs amounted to Rs 17 billion with a tenor of five years and the Series II NCDs amounted to Rs 10 billion with a tenor of 10 years.

Equity moves and IPOs

The key IPO launch in the past one year was that of the Indian Energy Exchange (IEX), the country’s largest power exchange. The issue, which was in October 2017, was oversubscribed by over two times. IREDA, Sembcorp and ReNew Power filed their IPO papers with the Securities and Exchange Board of India (SEBI). However, their IPO launch plans have been impacted by damp market conditions.

  • In August 2018, Sembcorp Energy India received SEBI’s approval to float its IPO. Sembcorp Energy plans to issue fresh shares worth Rs 40.95 billion for the offering while the existing investors will cumulatively sell up to 196.7 million shares. Sembcorp Utilities was to sell 128.9 million shares and Gayatri Energy Ventures up to 17.8 million shares. The IPO has, however, been pushed back as investors raised concerns over the macroeconomic environment and the pricing.
  • In July 2018, ReNew Power received SEBI’s approval for its IPO. The Rs 26 billion IPO will comprise a fresh issue of shares along with an offer for the sale of 94.3 million shares owned by existing shareholders such as the Global Environment Fund, Green Rock Energy and GS Wyvern Holdings. The equity shares will have a face value of Rs 10 each. However, the IPO has been deferred for now.
  • In April 2018, Reliance Power received the shareholders’ approval to raise up to Rs 20 billion through the qualified institutional placement (QIP) route. The proposed issue may be made in one or more tranches such that the aggregate amount raised does not exceed Rs 20 billion.
  • In March 2018, JSW Energy Limited acquired 100 per cent stake in JSW Electric Vehicles Private Limited at a face value of Rs 100,000. With this acquisition, JSW Energy has marked its foray into the electric vehicle (EV), energy storage systems and charging infrastructure segments.
  • In February 2018, the India Grid Trust (IndiGrid) acquired three transmission assets worth Rs 14.1 billion from its sponsor, Sterlite Power Grid Ventures Limited. The acquired projects were RAPP Transmission Company Limited, Purulia Kharagpur Transmission Company Limited and Maheshwaram Transmission Limited. With these acquisitions, IndiGrid now has assets worth Rs 53 billion under its management. IndiGrid has also agreed to invest Rs 2.3 billion in Patran Transmission Company, a third-party asset owned by Techno Electric.
  • In January 2018, Sterlite Power Grid Ventures Limited acquired a 28.4 per cent stake worth Rs 10.1 billion in its transmission infrastructure business from Standard Chartered Private Equity Limited (SCPE). With this, the company now holds 100 per cent stake in its business. SCPE had acquired the stake in Sterlite Power for Rs 5 billion in 2014 and this was the first private foreign investment in the Indian transmission sector.
  • In March 2018, Jindal Steel and Power Limited (JSPL) raised Rs 12 billion through a QIP. The company has issued about 51.5 million equity shares with a face value of Re 1 each, at a price of Rs 233 per share, including a premium of Rs 232.
  • In December 2017, IREDA filed draft papers with SEBI for the issue of its IPO. The IPO will involve the sale of 139 million equity shares of IREDA and a reservation of 0.69 million equity shares for eligible employees.
  • In October 2017, the IEX made its debut on the Bombay Stock Exchange. Its IPO was subscribed 2.28 times on the issue closing, and received bids for 12,044,799 shares against an issue size of 5,275,889 shares. The IPO offered shares with a face value of Rs 10 each in the price band of Rs 1,645-Rs 1,650 and offered 6.1 million shares being sold by existing shareholders.
  • In October 2017, lenders of Essar Power Gujarat Limited, an SPV of Essar Power Limited that operates the 1,200 MW imported coal-based power plant at Salaya in Gujarat, converted 51 per cent shares of the company pledged with it into equity, with the remaining 49 per cent being retained by Essar Power. The decision came after the Supreme Court denied compensatory tariffs to imported coal-based plants.

Multilateral funding

Several multilateral loan agreements were signed during the past 12 months, which focused mainly on the renewable energy and energy efficiency segments.

  • In August 2018, the central government, the World Bank and EESL signed a $220 million loan agreement and an $80 million guarantee pact to drive the energy efficiency programmes in India. Earlier, in November 2017, EESL entered into a partnership with the Global Environmental Facility (GEF) to receive a funding of $454 million for the project, Creating and Sustaining Markets for Energy Efficiency. The funding comprised a GEF grant of $20 million and co-financing of $434 million in the form of loans and equity.
  • Also, in August 2018, REC signed a Euro 200 million loan agreement with the German bank KfW. The loan proceeds will be utilised to finance clean energy projects in the country.
  • In July 2018, the World Bank approved a $250 million development policy loan for improvement of electricity distribution under the Power for All scheme in Rajasthan. The state government will receive the loan under the Second Programmatic Electricity Distribution Reform Development Policy Loan for Rajasthan scheme. The first such loan was approved in March 2017.
  • In March 2018, the US Trade and Development Agency (USTDA) extended a $1 million grant to BSES Rajdhani Power Limited to develop and deploy India’s first Behavioural Energy Efficiency Programme (BEEP) in south and west Delhi. The USTDA extended another grant to Tata Power Delhi Distribution Limited to develop opportunities in distributed energy resource areas such as integration of rooftop solar, energy storage solutions and EVs.
  • In December 2017, the Asian Development Bank (ADB) approved a loan package of $583 million for developing RPower’s LNG terminal along with a 750 MW power project in Bangladesh. The loan package includes loans and partial risk guarantees for both the projects. The two projects are expected to significantly increase power generation and augment the energy infrastructure in Bangladesh.

•             In October 2017, ADB expanded financing for additional power transmission network components under the Green Energy Corridors Grid Strengthening Project in India with co-financing from the Asian Infrastructure Investment Bank (AIIB). The project is being expanded to include 400 kV transmission components in Tamil Nadu to connect at Pugalur with long-distance grid systems financed by ADB. Of the total project cost of $303.5 million, ADB will provide $50 million, whereas AIIB will provide $100 million. The


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