Financing Round-up

Major debt and equity moves in 2021

The power sector, particularly generation and transmission, witnessed key financings in the year 2021. The fi­nancing deals in conventional generation mainly focused on the resolution of stre­ssed assets (Essar Power’s Mahan thermal power project and the Jaypee Group’s Rangit-IV hydro project) and the selling off of coal-based projects by promoters to trim debt and reduce exposure to carbon unfriendly businesses (Jindal Steel and Power’s divestment of the 3,400 MW coal-based Tamnar project). In the renewable energy space, key merger and acquisition deals were signed by existing players to expand their portfolio and consolidate their presence in the sector. One of the largest deals was Adani Green Energy Li­mi­ted’s acquisition of the renewable en­er­gy portfolio of SB Energy (promoted by Japanese SoftBank Group). Mean­while, the transmission segment witnessed varied financing deals/transactions including acquisition of insolvent firms, financial closure of key projects and raising of capital from the primary market. A significant one was the launch of the initial public offering (IPO) of Powergrid Infra­structure Investment Trust (PGInvIT), the maiden infrastructure investment trust (InvIT) of Power Grid Corporation of In­dia Limited (Powergrid), marking the beginning of its asset monetisation drive. Power Line presents a round-up of the key financings in the power sector in the past 12 months…

Generation

In November 2021, Adani Power Limited received approval from the National Company Law Tribunal (NCLT) to acqu­i­re Essar Power’s 1,200 MW thermal po­wer plant in Mahan, Madhya Pradesh. The NCLT has approved the resolution plan submitted by Adani Power for ac­quisition of Essar Power M.P. Limited (EPMPL), as the company is undergoing insolvency resolution under the Insol­ve­ncy and Bankruptcy Code. EPMPL owns a 1,200 MW thermal power plant in Sin­gra­uli district of Madhya Pradesh. The deal size of the project is estimated at Rs 28 billion-Rs 30 billion.

In October 2021, Reliance New Energy Solar Limited (RNESL), a wholly owned subsidiary of Reliance Industries Limi­t­ed (RIL), acquired REC Solar Holdings from China National Bluestar (Group) Co­mpa­ny Limited for an enterprise val­ue of $771 million. The acquisition is in line with RIL’s objective of becoming net carbon zero by 2035, following its ann­ounceme­nt in June 2021 of investing $10.1 billion in clean energy over three ye­­­a­rs. In a separate development, RNESL has also signed a deal to acquire 25.9 per cent equity stake in Sterling and Wilson Solar Limited.

In August 2021, Jindal Steel and Power Limited (JSPL) divested its entire 96.42 per cent stake in Jindal Power Limited (JPL) to Worldone Private Limited. Jindal Po­wer Limited owns and operates a 3,400 MW coal-based power station in Chhattisgarh. Worldone is JSPL’s promo­ter group company, incorporated in 1999, which holds investments across various listed and unlisted companies. The divestment is part of JSPL’s strategic objectives of reducing debt, focusing on its core business (steel) and reducing its carbon footprint.

In August again, ReNew Power acquired the 99 MW Singoli Bhatwari hydroelectric project from L&T Uttaranchal Hy­dro­power Limited for Rs 9.85 billion, ma­r­king the former’s entry in the hy­d­ropower sector. The project is located on the Mandakini river in Rudraprayag district, Uttarakhand, and was commissioned in December 2020. In a separate transaction, ReNew Power signed a de­finitive agreement to acquire 260 MW/ 330 MWp of operating solar projects in Telangana. The projects have 25-year power purchase agreements (PPAs) with the state discoms, and have been operating for about four years.

In May 2021, Adani Green Energy Limi­ted acquired SB Energy India through an equity purchase worth $625 million (about Rs 46 billion), marking the largest merger and acquisition deal in the re­ne­wable energy space in India. SB Energy, an 80:20 alliance by the SoftBank Group and Bharti Enterprises, has 4.95 GW of renewable assets.

In March 2021, NHPC Limited completed the takeover of Jal Power Corporation Limited’s 120 MW Rangit-IV hydroelectric Project in Sikkim. The stressed un­der-construction project was handed over to NHPC after the payment of a resolution amount to the tune of Rs 1.65 billion to the lenders.

In March again, Reliance Power Limited and Japanese power producer JERA Co. achieved financial closure for their 745 MW gas-based combined cycle power project in Bangladesh by tying up funds totalling $642 million with a group of lenders including the Japan Bank for In­ternational Cooperation and the Asian Development Bank. This project is coming up in Meghnaghat and the electricity generated will be sold under a 22-year long-term PPA with the Bangladesh Po­wer Development Board.

In February 2021, NTPC Limited signed a share purchase agreement to buy GAIL’s 25.51 per cent stake in Ratnagiri Gas and Power Limited (RGPPL). RGPPL was in­corporated in 2005 and promoted by NTPC and GAIL (India). The company was set up to take over and revive the 1,967 MW gas-based power plant of Da­bhol Power Company in Maharashtra.

Transmission

In November 2021, Resurgent Power Ve­ntures, a subsidiary of Tata Power, emer­ged the highest bidder for South East UP Power Transmission Company Limited (SEUPPTCL) with a Rs 30 billion offer to buy the firm under the insolvency pro­cess. Madrid-based company Isolux Co­r­san had won a 35-year concession to build and operate a transmission netwo­rk spanning 1,600 km in Uttar Pradesh under SEUPPTCL in July 2011. However, due to a strain in its home country and its US operations, it ended up filing for bankruptcy. In November again, Re­su­rgent Power Ventures emerged successful in acquiring 100 per cent stake in the NRSS XXXVI Transmission Project. The transaction is a part of stressed transmission asset resolution process initiated by PTC Financial Services through a competitive bidding process.

In October 2021, Adani Transmission Limited (ATL) raised $700 million for financing its under-construction transmission portfolio in one of Asia’s largest revolving project financing deals. ATL has raised the funds through definitive ag­reements signed with eight leading international banks. Standard Chartered Bank acted as the mandated lead ar­ranger and bookrunner. The unique ca­pex revolving structure of the facility will provide funding of $1.1 billion on a fully drawn basis.

In August 2021, Sterlite Power Trans­mis­sion Limited filed a draft red herring pro­spectus with the Securities Exchange Board of India (SEBI) to raise Rs 12.5 billion through an IPO. In December 2021, SEBI gave its nod to the IPO. The IPO will consist entirely of new equity shares with a face value of Rs 2 each, valued at Rs 12.5 billion. The IPO is anticipated to take pl­ace in the fourth quarter of 2021-22.

In June 2021, Sterlite Power achieved fi­nancial closure for the project set up by Udupi-Kasargode Transmission Project Limited (UKTL) and secured the entire debt funding of Rs 5.8 billion from REC Limited. The interstate transmission sy­stem project, across the states of Karna­taka and Kerala, is made up of two critical elements, one of which is a 1,000 MVA 400/220 kV gas-insulated switch­gear substation to be built at Kasargode in Kerala.

In April 2021, Powergrid launched the PGInvIT IPO, making the company the first state-run entity to do so. Despite the pandemic, the IPO received a strong response from investors. The Rs 77.35 bi­llion public issue was oversubscribed nearly 4.83 times, having received bids for 2.05 billion units against an offer size of 425.4 million units. Subsequently, PGInvIT made its debut on the stock ex­changes on May 14, 2021 at a premium of 4 per cent over the issue price. This is the country’s third InvIT to be listed on the bourses after the IRB InvIT (road sector) and India Grid Trust InvIT (also in power transmission).

In March 2021, ATL signed an agreement with Essel Infraprojects Limited (EIL) for the acquisition of Warora Kurnool Tran­smission Limited (WKTL) for an enterprise valuation of Rs 33.7 billion. WKTL will develop, operate and maintain a transmission system of around 1,750 ckt. km across Maharashtra, Telangana and Andhra Pradesh. The project was awarded to EIL through the TBCB process on a build-own-operate-maintain basis. It has a concession period of 35 years. The Central Electricity Regula­tory Commis­sion has provided regulatory approval for substitution of the original awardee (EIL) in the contract with ATL. In March again, Powergrid signed an ag­reement to ac­qu­ire a 74 per cent stake in Jaypee Po­w­er­grid Limited from Jai­pra­kash Power Ven­tures Limited (JPVL) for Rs 3.5 billion, making Jaypee a wholly owned subsidiary of Powergrid.

In end-December 2020, global investment manager AMP Capital set up a 50:50 partnership with Sterlite Power for the development of transmission projects in India. This marked the first in­vestment in India for AMP Capital’s glo­bal infrastructure equity strategy. AMP Capital and Sterlite Power decided to each invest an initial amount of about $150 million in the development of four transmission projects totalling a line length of 1,800 ckt km, and have put in place debt financing, which represents a total capital outlay of around $1 billion.

Distribution

Only one financing deal was recorded in the distribution segment, when Adani Electricity Mumbai Limited (AEML) listed its $2 billion global medium-term no­te programme on the BSE-owned India International Exchange’s debt listing platform in July 2021. AEML plans to use the proceeds from the programme to fund its capex.

Neha Bhatnagar

 

 

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