Actis explores sale of Ostro Energy to ReNew Power Ventures

Global private equity firm Actis LLP is exploring the sale of Ostro Energy Pvt. Ltd to ReNew Power Ventures Pvt. Ltd, in a transaction that may rank among India’s largest renewable energy deals, multiple people aware of the development said. Ostro Energy and Solenergi are among the energy platforms that Actis has created globally, following Globeleq Mesoamerica Energy in central America, Zuma Energia in Mexico, Aela Energia in Chile and Atlantic Energias Renovaveis in Brazil. With 648.1 megawatts (MW) of operational wind projects and 460MW of wind and solar capacity under active construction, Ostro plans to build 1,000MW of renewable energy projects by 2019. Analysts say Ostro is an attractive buy. “If we look at the developer landscape, there are very few platforms offering scale, asset quality and transparency. With a portfolio size of almost 1,000MW, Ostro is one of the most attractive buy prospects in the sector,” said Vinay Rustagi, managing director at consulting firm Bridge to India. “Closures (of deals) have been held up because of wide gap between expectations of buyers and sellers. But things are coming to a head and we expect frantic activity in the next 12-18 months,” he added. Mint reported on 31 May about the proposed sale of Ostro as the exit horizon approaches for Actis. The sale mandate has been given to Bank of America Merrill Lynch. “ReNew is looking at the Actis platform. There are not many players who have capital at their disposal to make such large acquisitions,” said a person aware of the development on condition of anonymity. Japan’s JERA Co. Inc. bought a 10% stake in ReNew Power for $200 million in February, before a proposed initial share sale of the clean energy firm run by Sumant Sinha, valuing the company at $2 billion. Apart from Goldman Sachs Group Inc. and the Abu Dhabi Investment Authority, other investors in ReNew Power include Asian Development Bank and Global Environment Fund. “ReNew is interested in Ostro Energy,” said another person aware of the development, requesting anonymity. As part of the consolidation exercise unfolding in the Indian clean energy space, ongoing deal activity, as reported by Mint, includes Subhash Chandra’s Essel Infraprojects Ltd mandating Investec to find a buyer for its solar business and Finland’s state-controlled power utility Fortum OYJ hiring Barclays Bank Plc. for a stake sale in its operational solar power projects in India. Also, Canadian solar energy developer SkyPower Ltd has hired Yes Bank Ltd to sell a stake in its solar projects in India and diversified conglomerate Shapoorji Pallonji Group is in stake sale talks for its solar project portfolio. Experts believe that while consolidation is the way ahead for clean energy in India, not many deals are nearing fruition. “Ultimately, it all boils down to valuation,” said a Mumbai-based dealmaker aware of ReNew Power’s interest in Ostro Energy’s assets. This person, too, declined to be identified. In February 2015, Actis committed $280 million to create renewable energy platform Ostro Energy, which helped it bid aggressively for India’s solar power project contracts. Encouraged by Ostro’s success, Actis set up a second green energy platform in India, Solenergi Power Pvt. Ltd, which was among the successful bidders for the Rewa solar power project in Madhya Pradesh. A ReNew Power spokesperson in an emailed response said, “We would not like to comment on market speculation.” ReNew Power has around 3.5 gigawatts (GW) of operational and under-construction capacity from its own wind and solar projects. The firm has set a target of over 11GW of wind and solar power capacity over next five years. Spokespersons for Actis and Bank of America Merrill Lynch declined to comment. Actis invests exclusively in emerging markets, focusing on energy and real estate. Of the $7.8 billion deployed by Actis, 27% is in energy. Marquee deals in the Indian renewable energy sector include Tata Power Co. Ltd acquiring the entire 1.1GW renewable energy portfolio of Welspun Energy Ltd for $1.4 billion and Hyderabad-based Greenko Energies Pvt. Ltd—backed by Singapore’s sovereign wealth fund GIC Holdings Pte. and Abu Dhabi Investment Authority—acquiring SunEdison Inc.’s Indian assets for $392 million last year.