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SunEdison, the largest renewable energy development company in the world by generation capacity, on Tuesday announced it has signed a definitive agreement to acquire Mumbai-based Continuum Wind Energy. The buyout - the biggest in the clean energy sector in the country so far - will significantly consolidate its local presence and further highlight the frenzied global interest in the Indian renewable energy sector in the backdrop of the Modi government's renewed focus on the space and its ambitious target to add 100 GW (100,000 MW) renewable capacity by 2022. Currently only 20 GW of wind farms operate in India.
The Belmont, California headquartered SunEdison, which is listed on Nasdaq, will take over 242 MW of operating wind assets that Continuum owns and operates in Maharastra and Gujarat as well as 170 MW of assets under contruction. The company also has 1000 MW of plants in development across 6 states. This will be the third wind buy for SunEdison - In May, they acquired two renewable energy portfolios, including the domestic portfolio of around 100 MW of Spain-based FersaEnergias Renovables, SA. ET in its June 2nd edition was the first to report that Sun Edison is set to buy Continuum.
Sun Edison has not disclosed the deal value in any official communication, but sources close to the transaction said Continuum Wind Energy has been valued at Rs 3,720-3,900 crore ($620-650 million), inclusive of its debt. The equity value alone has been pegged at around Rs 1,920 crore ($320 million). Analysts tracking the sector estimate that the company should close FY15 with Rs 400 crore of revenue. The deal is expected to close in the next 6-8 weeks.
"India is a core market for SunEdison and offers tremendous growth opportunities in both wind and solar energy. We made a commitment to Prime Minister Modi that we will deliver 15.2 GW of renewable energy by 2022. We are putting our money where our mouth is," Pashupathy Gopalan, President of SunEdison, Asia Pacific told ET on a call from South Africa.
Originally founded by an investment banker turned green energy entrepreneuer Arvind Bansal and his IIM-Ahmedabad classmate Vikash Saraf of Essar Group, Continuum Wind Energy was controlled by Morgan Stanley's infrastructure focussed private equity fund -- Morgan Stanley Infrastructure (MSI). MSI, a $4 billion global platform, is part of the global financial services firm's direct private investment group.
In 2012, MSI had invested $200 million (Rs 1200 crore) into the company through a convertible instrument to buy a majority stake. Till date they have already deployed around $160 million, said sources.
Both MSI and the erstwhile promoters are cashing out post the takeover but Bansal and the senior management will stay on for a minimum transitory period of 3-4 years running the operations, said officials in the know.
"Our aspirations of growth is mutual. With a large strategic like SunEdison, we will now be able to finance our growth and not worry about giving exits like we would have had to with PE partners," said Bansal. "We have in-house development capacities and we build our own projects instead of buying them on a turn-key basis. That's what help us stand out."
Raja Parthasarathy and SG Shyam Sundar the two MDs and Co-Heads, MSI in India were not available for comment till the time of going to press. Back of the envelope calculation shows, MSI will make 1.66 times return in 3 years in dollar terms --- commendable considering the sharp depriciation of the rupee in the same period. The founder duo are expected to make a rake in 4.6 times their initial investment, said analysts.
SUN-RISE IN INDIA
Buoyed by the government's push towards green energy, SunEdison has charted out an ambitious play in India. Gopalan said, of the 15 GW that his company plans to install in India, 10 GW will be solar with the rest predominantly wind. "Solar may be the number 1 resource in India but we are yet to see the best of wind. There is enough room for growth," he added. Earlier this year, the company signed an agreement with Adani Enterprises for a $4 bn JV to build solar panels in Gujarat.
SunEdison has been scaling up especially in wind. Globally too, they are adding to their wind portfolio significantly through large buyouts. Last November, it agreed to take over First Wind, one of the largest wind power developers in the United States, for $2.4 billion - making it the largest player in one shot. That aquisition will expand SunEdison's project installation pipeline for 2015 by an estimated 500 megawatts.
MSI and Bansal had mandated investment banks in 2013 to secure additional equity funding of close to $200 million from PE or strategic players. However discussions then with global utility firms like GDF and some from Malaysia and Thailand did not progress much. More recently, talks with Malaysia's SWF Khazanah and IFC - an existing lender of the company - had also evaluated the prospect of coming on board.
Other than being a cleaner option and a massive employment generating opportunity, prospects of renewable energy has improved considerably since the economics of green power has improved considerably. Wind power is almost close to grid parity as it almost comparable to imported coal in terms of cost. The prices of turbines and other equipment have also come down over the last few years. So have the prices for solar panels.
Foreign investors too are also becoming for perceptive to the opportunities. Earlier this February Sembcorp Utilities, a wholly owned subsidiary of Sembcorp Industries, Singapore's leading utilities and marine group, took a controlling 60% stake in Green Infra - a leading renewable energy platform -- from its private equity owners IDFC Alternatives for Rs 1051 crore. This was their first investment in the space in India, after backing two coastal thermal coal projects in Andhra Pradesh since 2011. This was also the first and only FDI into the power sector in India in the last one year of the Narendra Modi government.
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