GIC in talks to acquire Greenko’s Indian assets

Indian renewable energy company Greenko Group and Aranda Investments, a unit of Singapore’s state fund GIC, have entered into a non-binding agreement for GIC to purchase the totality of Greenko’sstake in its Mauritius-based holding firm for Indian assets – Greenko Mauritius – to GIC for a consideration of US $255 million.

If completed, the deal will see Greenko Mauritius’ portfolio of India-based wind, hydroelectricity, biomass and natural gas assets being transferred to the GIC portfolio, along with associated financial liabilities. Investec Bank and Arden Partners are advising Greenko’s management the deal.

Greenko is an Indian power generation and energy infrastructure firm listed on the London AIM (alternative investment market) stock exchange, where it is listed. It currently maintains a market capitalisation of $196.16 million.

GIC is an existing investor in Greenko Mauritius through Aranda, which counts cleantech fund Global Environment Emerging Markets Fund III LP among its private investors. Greenko’s stake in in Greenko Mauritius is in excess of 68 percent, not counting preferential shares held by private investors in the Mauritius unit.

2014 saw Greenko raise $125 million from Washington-based energy and infrastructure-focused asset management firm EIG Global Energy Partners. The capital raised was to refinance debt worth $70 million from Standard Chartered due in January 2015 and to support further development of renewable power projects in India. It also raised $500 million last year via the sale of bonds.

This deal will increase GIC’s exposure to and footprint in the Indian renewable energy business, expanding both its scale and depth. GIC invested $150 million in Greenko Mauritius in 2013.

This investment was aimed at increasing its operating capacity to 2000 megawatts (MW) by 2018, double the targeted 1000 MW capacity for 2015, and also came with a convertible clause for GIC to convert it into stake in Greenko Group between July 1, 2015, and June 30, 2017, with GIC able to select between 19.5 percent to 29.99 percent in Greenko Group on a fully diluted basis.

H1 2015 has see GIC scale up its investments in India. Currently, it invests in Indian infrastructure firms like power utility player GVK Energy and the state-run power utility NTPC.

Recent additions to the GIC portfolio through H2 2014 and H1 2015 include Flipkart, Sulekha, Bandhan, IT Park owner Nirlon and established joint ventures with Vatika and Brigade Enterprises. GIC also recently entered a transaction involving Syngene International’s IPO as an anchor investor.

For 2015, financial results for the year ending 31 December 2015 predicted to be below market expectations, due to a number of factors. Among them are a late and slow start to the monsoon season. This is in conjunction with their 70 MW Budhil hydro project selling power into the short term merchant market at reduced prices while a power purchase agreement (PPA) is being negotiated and finalised.

Greenko’s power generation has increased by 49 percent to 904 GWh, compared to 606 GWh in the comparable period last year. Installed operational capacity increased to 838 MW during the period, compared to 596 MW at the end of June 2014, with their operating portfolio performing well due to high average availability.

In a regulatory filing, Greenko noted that “…the backdrop for clean energy in India remains extremely positive, with strong Government support, and is attracting significant inward investment”, as well as noting that their wind and hydropower portfolios had reached profitable grid parity with conventional generation across several Indian states.

Against this backdrop, their hydropower power capacity is set to grow. According to Indian business publication LiveMint, Greenko is seeking hydropower assets, with plans to increase power generation capacity five-fold to 5000 MW by 2020.

“Overall, the backdrop for clean energy in India remains extremely positive, with strong government support, and is attracting significant inward investment,” the company stated in a media release. With this backdrop in view, the returns from this acquisition are a long-term positive for GIC.