Key Financings: Major debt and equity moves

Major debt and equity moves

October 13, 2022

Financing activity has picked up pace in the power sector driven by India’s ambitious plans of achieving 450 GW by 2030. In the past year, the sector has witnessed some significant fundraisings through commercial loans and green bond issuances. For global investors, India remained a priority market for renewable energy growth. Power Line presents a round-up of the major financing moves during the past 12 months…

Mergers and acquisitions

The sector witnessed several big-ticket merger and acquisition (M&A) deals in the past 12 months, especially in the clean energy sector. These included JSW Energy Limited’s acquisition of Mytrah Energy (India) Private Limited’s 1.8 GW renewable energy portfolio and Adani Green Energy Limited’s (AGEL) acquisition of SB Energy India for Rs 260 billion.

  • In September 2022, JSW Energy Limited’s wholly owned subsidiary, JSW Neo Energy Limited, announced the acquisition of Mytrah Energy (India) Private Limited’s 1.8 GW renewable energy portfolio for a consideration of Rs 105.31 billion. This is the largest acquisition made by JSW Energy since its inception, which will increase its operational capacity by over 35 per cent from 4,784 MW to 6,537 MW.
  • In August 2022, Adani Power Limited announced the acquisition of DB Power Limited at an enterprise value of Rs 70.17 billion. DB Power owns and operates a running 2×600 MW thermal power plant in Janjgir Champa district, Chhattisgarh. DB Power has long- and medium-term power purchase agreements (PPAs) for 923.5 MW of its capacity and has been operating its facilities profitably.
  • In August 2022, Torrent Power Limited acquired 100 per cent equity share capital in Wind Two Renergy Private Limited (WTRPL) from Inox Green Energy Services Limited for Rs 325.1 million. WTRPL has set up a 50 MW wind power project in Kutch district of Gujarat. The electricity generated is supplied to PTC India Limited under a 25-year PPA.
  • In July 2022, TotalEnergies announced the acquisition of 25 per cent minority stake from Adani Enterprises Limited in Adani New Industries Limited. The partnership is centred on green hydrogen. In the initial phase, Adani New Industries will develop a green hydrogen production capacity of 1 million tonnes per annum by 2030.
  • In July 2022, Adani Transmission Limited (ATL) signed definitive agreements with Essar Power Limited to acquire the Essar Mahan Sipat Transmission Project, an operational transmission project owned and operated by Essar Power Transmission Limited, for an enterprise value of Rs 19.13 billion. The acquisition will add 673 ckt. km of 400 kV interstate transmission line length from Mahan in Madhya Pradesh to the Sipat pooling substation in Chhattisgarh under the Central Electricity Regulatory Commission-regulated return framework.
  • In June 2022, Rays Power Infra Private Limited sold its solar projects in Tamil Nadu, Karnataka and Telangana to two global investors at an aggregate enterprise value of over Rs 7 billion. The sold assets had debt worth approximately Rs 4 billion and EBITDA of Rs 950 million. These were high-tariff, well-performing assets commissioned between 2017 and 2020.
  • In February 2022, ReNew Power sold 117 MW/138 MWp of its distributed roof­top solar portfolio to Fourth Partner Energy Private Limited for Rs 6.72 billion. After accounting for its outstanding debt of Rs 1.37 billion, the cash proceeds from the sale amount to Rs 5.35 billion.
  • In October 2021, AGEL completed the acquisition of SB Energy India for Rs 260 billion. Earlier, in May 2021, AGEL had signed share purchase agreements with the SoftBank Group and the Bharti Group to acquire 100 per cent interest in SB Energy India.

Major loan agreements

In the past 12 months, several key players in the power sector have secured sizeable loans and funds for diverse purposes such as project development and fund acquisitions. Some prominent agreements included REC Limited’s $1,175 million loan raised from a consortium of seven banks, SJVN Arun-3 Power Development Company’s Rs 63.33 billion term loan agreement with banks from India and Nepal, as well as Reliance Industries Limited’s (RIL) $736 billion green loan to fund an acquisition.

  • In August 2022, Greenko secured a Rs 55 billion loan from the Power Finance Corporation (PFC) to build a 1,200 MW off-river energy storage project in Andhra Pradesh. The loan, with a tenor of 20 years, has been priced at 11 per cent per annum interest.
  • In April 2022, SJVN Limited achieved financial closure by signing a loan agreement amounting to Rs 4.94 billion with the Himachal Pradesh State Co-operative Bank for Development for the 66 MW Dhaulasidh hydroelectric project (HEP) in the Hamirpur and Kangra districts of Himachal Pradesh. Earlier, in February 2022, SJVN Arun-3 Power Development Company, a subsidiary of SJVN Limited in Nepal, signed a Rs 63.33 billion term loan agreement with a consortium of banks from India and Nepal. The consortium is led by the State Bank of India and the Punjab National Bank, and includes Exim Bank, Canara Bank, Union Bank of India, and Nepal’s Everest Bank and Nabil Bank. SJVN aims to complete the construction of the 900 MW Arun-3 HEP in Nepal in 2023-24, one year ahead of the scheduled commissioning in February 2025, as required under the project development agreement and financing documents.
  • In January 2022, REC Limited raised $1,175 million from a consortium of seven banks as the mandated lead arrangers and bookrunners. The deal, benchmarked to the USD London Inter­bank Offered Rate, was anchored by seven Indian and international banks – Axis Bank, Bank of Baroda, Bank of India, Canara Bank, DBS Bank, Mitsubishi UFJ Financial Group and Sumitomo Mitsui Banking Corporation. The deal will be launched in the Asian Loan Syndication market shortly. The proceeds from this facility will be utilised to fund infrastructure power sector projects. Earlier, in October 2021, REC Limited had raised a $75 million, five-year secured overnight financing rate (SOFR)-linked syndicated term loan from Sumitomo Mitsui Banking Corporation. REC also entered into interest rate swap referencing SOFR to hedge the interest rate risk on this facility.
  • In December 2021, RIL raised a $736 million green loan to finance its largest overseas purchase, REC Solar Holdings, in Norway. The loan facility consists of a $250 million six-year term loan, a $150 million working capital facility and a $460 million five-year bank guarantee facility.

Bond issuance

It was a gainful year for the power sector in the bond market. A number of key market players issued bonds in the last 12 months for the purpose of refinancing and raising funds. Major players issued green bonds in both national and international stock markets.

  • In February 2022, the Virescent Renewable Energy Trust (VRET) raised Rs 6.5 billion through a domestic bond issuance across 7.33-year (Rs 1.5 billion) and 10-year (Rs 5 billion) tranches. The average quarterly coupon of the bonds is 7.93 per cent, fully fixed for the entire tenor. VRET will primarily use the bond proceeds to fund its immediate acquisition-related debt requirements as it scales up its portfolio from the existing 450 MW (peak) of operational solar projects.
  • In July 2022, ReNew Energy Global plc refinanced its 2024 maturity dollar-denominated bonds with amortising project debt from an Indian non-bank financial company, becoming the first Indian renewable energy company to do so. ReNew had issued bonds worth $525 million in 2019, which were set to mature in 2024.
  • In May 2022, PFC listed its maiden 300 million 1.841 per cent Euro green bonds on the Luxembourg Stock Exchange. The listing was done under the cooperation agreement signed between India International Exchange Limited and the Luxembourg Stock Exchange. These bonds were first issued in September 2021, with a pricing of 1.841 per cent. It was the lowest yield locked in by an Indian issuer in the Euro markets.
  • In April 2022, Sterlite Power Brasil, a subsidiary of Indian corporation Sterlite Power Transmission Limited, which develops energy transmission projects, announced the issuance of BRL 600 million of debentures. Banco Modal and Banco Itaú BBA coordinated the transaction. The funds will be utilised for the Goyaz (GO), Borborema (PB) and Solaris (MG) projects. Together, the three projects comprise 548.47 km of transmission lines and will benefit 29 million people.
  • In February 2022, Azure Power announced the successful refinancing of its 600 MW solar power project in Bikaner, Rajasthan, at an interest rate of 7.2 per cent per annum. The company has refinanced its existing project finance facility of Rs 23.5 billion utilised towards the construction of its largest project, the 600 MW interstate transmission system-connected solar project implemented by Azure Power Forty-Three Private Limited.

Equity moves

The year witnessed some major initial public offering (IPO) announcements by Inox Green Energy and Vikram Solar. The segment also saw some notable equity investments with foreign investors picking up stakes in majors such as Tata Power, Reliance Power, AGEL and Apraava Energy.

  • In September 2022, Reliance Power Limited along with its subsidiary entered into an indicative MoU with investment firm Varde Partners for raising debt of up to Rs 12 billion. The proceeds will be used for settlement and discharge, acquisition and restructuring of certain financial debt secured by Reliance Power. The drawdown of the debt will be subject to finalisation and execution of binding documents and all requisite approvals including regulatory approvals as per the applicable rules/laws/regulations.
  • In August 2022, Vikram Solar Limited received the Securities and Exchange Board of India’s (SEBI) approval to raise funds through an IPO. The IPO consists of a fresh issue of up to Rs 15 billion and an offer for sale (OFS) of up to 5 million equity shares by the selling shareholders.
  • In July 2022, Caisse de dépôt et placement du Québec (CDPQ), a global investment group, has increased its stake in Apraava Energy (formerly known as CLP India) by acquiring an additional 10 per cent stake from the CLP Group for Rs 6.6 billion. With this, both CDPQ and CLP will hold 50 per cent stake each in the company. In 2018, CDPQ had acquired a 40 per cent stake in Apraava, with CLP retaining a 60 per cent stake. Following the current transaction, CDPQ will have increased governance rights, equal to those of CLP, over Apraava Energy. The completion of the deal is subject to fulfilment of several conditions, including regulatory approvals.
  • In June 2022, Inox Green Energy Services Limited filed preliminary papers with SEBI to raise Rs 7.4 billion through an IPO. According to the draft red herring prospectus filed by the company, the IPO comprises fresh issuance of equity shares worth Rs 3.7 billion and an OFS of equity stocks aggregating Rs 3.7 billion by promoter Inox Wind.
  • In June 2022, Tata Power signed a binding agreement with a consortium comprising BlackRock Real Assets and the Mubadala Investment Company as co-investors to raise Rs 40 billion for its renewable energy platform. This investment will proceed by way of equity or compulsorily convertible instruments for a 10.53 per cent stake in Tata Power Renewables, translating into a base equity valuation of Rs 340 billion. The investment will be used to fund Tata Power Renewables’ growth plans in five distinct businesses focusing on consumer-oriented solutions.
  • In April 2022, Abu Dhabi-based conglomerate International Holding Company PJSC (IHC) announced an investment of $2 billion (Rs 154 billion) as primary capital in three subsidiaries of the Adani Group – AGEL, ATL and Adani Enterprises Limited (AEL) – through the preferential allotment route. IHC will invest Rs 38.5 billion in AGEL, Rs 38.5 billion in ATL and Rs 77 billion in AEL. The boards of AGEL, ATL and AEL have approved the transaction. The capital will be utilised for pursuing the growth of the respective businesses, strengthening their balance sheets and general corporate purposes.
  • In February 2022, RIL acquired 40 per cent equity stake in the Shapoorji Pallonji Group’s Sterling and Wilson Renewable Energy Limited.
  • In January 2022, NTPC Vidyut Vyapar Nigam Limited (NVVNL) acquired a 5 per cent equity stake in Power Exchange of India Limited (PXIL). NVVNL purchased the shares of PXIL from NSE Investment, a co-promoter shareholder of PXIL, on January 31, 2022.
  • In January 2022, the Cabinet Committee on Economic Affairs approved the equity infusion of Rs 15 billion in the Indian Renewable Energy Development Agency.

Multilateral finance deals

The power sector saw a number of multilateral deals for power infrastructure development with international organisations and banks such as the World Bank, the International Bank for Reconstruction and Development (IBRD) and KfW Developmental Bank.

  • In July 2022, the World Bank approved an additional $165 million financing to support 450 MW of rooftop solar deployment in the residential sector of India.
  • In December 2021, REC Limited signed an agreement with KfW Development Bank for an official development assistance (ODA) term loan of $169.5 million under the Indo-German Bilateral Partnership. The proceeds of the ODA loan will be deployed for part financing of innovative solar PV technology-based generation projects in India at competitive interest rates.
  • In December 2021, the Government of India and KfW signed agreements for a Euro 140 million reduced interest loan and Euro 2 million grant for an energy reform programme in Madhya Pradesh. The project comprises two components – implementation of smart meters and advanced metering infrastructure; and separation of agricultural and non-agricultural feeders.
  • In November 2021, West Bengal secured a loan worth $135 million from IBRD to improve the operational efficiency and reliability of electricity supply in select pockets of the state. The variable spread loan or floating interest loan will have a maturity of 17 years, including a grace period of seven years.

Stressed assets

There has been steady progress in the resolution of stressed assets, which has been prioritised by several players in the past year. The National Company Law Tribunal (NCLT) initiated and approved multiple resolution plans for distressed assets and some of the stressed assets were also acquired by key players in the sector.

  • In September 2022, NTPC Limited acquired Jhabua Power Limited (JPL) for Rs 9.25 billion through a corporate insolvency resolution process initiated by the NCLT, Kolkata. This is the first acquisition of a power asset by NTPC through the NCLT route. As per the resolution plan, NTPC offered 50 per cent equity stake in JPL to the secured financial creditors while NTPC retained all the management rights and control over the company. JPL has an operational thermal power capacity of 600 MW in Seoni, Madhya Pradesh.
  • In September 2022, Adani Power Limited received approval from the 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 the acquisition of Essar Power MP Limited (EPMPL), as the company is undergoing insolvency resolution under the Insolvency and Bankruptcy Code (IBC). EPMPL owns a 1,200 MW thermal power plant in Singrauli district of Madhya Pradesh. The deal size of the project is Rs 28 billion-Rs 30 billion.
  • In August 2022, Vedanta Limited acquired Athena Chhattisgarh Power Limited for Rs 5.65 billion to meet its captive power requirements. Athena was admitted under the corporate insolvency resolution process in May 2019. The NCLT ordered the sale of the thermal company and started the auction process in December 2021, wherein Vedanta outbid JPL. Athena Chhattisgarh Power has a 1,200 MW coal-based power plant located in Jhanjgir Champa district in Chhattisgarh.
  • In August 2022, REC Limited’s board approved a proposal for subscribing to 50 per cent equity, not exceeding Rs 500 million, in PFC Projects Limited, a power asset management company. PFC Projects is a 50:50 joint venture company with PFC for taking over stressed/non-performing assets in the power sector. At present, PFC Projects has bid for two stressed projects – the 3,600 MW KSK Mahanadi Power project and the 1,920 MW Lanco Amarkantak power project.
  • In August 2022, the Uttar Pradesh power regulator approved the takeover of South East UP Power Transmission Company Limited by Resurgent Power Ventures (a JV between Tata Power and ICICI Bank). This is one of the first large-scale stressed transmission projects to be resolved through the IBC and accepted by the state electricity regulatory commission.