SunEdison of US likely to cut India’s biggest green power deal, values Continuum at Rs 3,720-3,900 crore

MUMBAI: SunEdison, the largest renewable energy development company in the world by generation capacity, is negotiating with the promoters of Mumbai-based Continuum Wind Energy to buy them out. The move will significantly consolidate its India presence and, if the deal is completed, would also be the biggest clean-tech acquisition in the country till date.

The Belmont, California headquartered SunEdison, which is listed on Nasdaq, is currently conducting an exclusive due diligence on Continuum, said multiple sources aware of the talks.

The discussions also underscore the growing global interest in the Indian clean energy sector which has already seen international players like Sembcorp and investors such as Goldman Sachs take control of Indian clean power developers in the backdrop of the Modi government’s renewed focus on the space and its ambitious target to add 100 gw (1,00,000 mw) renewable capacity by 2022. SunEdison has already made a non-binding offer, valuing Continuum Wind Energy at Rs 3,720-3,900 crore ($620-650 million), inclusive of its debt, according to the people cited.
The equity value alone has been pegged at around Rs 1,920 crore ($320 million). Post the diligence, SunEdison is expected to make a final, binding offer. However, the deal has not closed yet, said one of the people.

“The intent from both sides is very strong but there is still no guarantee that the talks will translate into a deal. SunEdison should complete the diligence and commercial negotiations by June-end and then make a binding offer,” said an official in the know.

Originally founded by an investment banker turned green energy entrepreneur Arvind Bansal and his IIM-Ahmedabad classmate Vikash Saraf of the Essar Group, Continuum Wind Energy is currently 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 private investment unit which invests directly in companies. In 2012, MSI had invested $200 million (Rs 1,200 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 expected to cash out post takeover but Bansal and the senior management will stay on for 3-4 years. By the end of the fiscal year ending March 31, 2016, Continuum is expected to have a portfolio of 500 mw of operating assets spread across wind parks in MP, Gujarat and Maharashtra. Analysts tracking the sector estimate that the company should close FY15 with Rs 400 crore of revenue.

A SunEdison India spokesperson declined to comment on what he termed as market speculation. Pashupathy Gopalan, President, SunEdison, Asia Pacific could not be reached despite several attempts since Friday. Repeated mails, calls and text messages sent to Raja Parthasarathy, MD and Co-Head, MSI and Arvind Bansal also did not generate any response till the time of going to press. A Morgan Stanley spokesperson in London also didn’t respond to ET’s questionnaire.

Sun shines in India

Buoyed by the government’s push towards green energy, SunEdison has charted out an ambitious play in India. It has announced plans to set up 15.2 gw (15,200 mw) of solar and wind energy capacity in India over 5 years. Even though the mix would be skewed towards solar, considering SunEdison’s global expertise, in recent media interactions, Gopalan, the company’s head for the region, has been quoted as saying that wind could be a third of the committed figure.

Earlier this year, the company signed an agreement with Adani Enterprises for a $4-billion joint venture to build solar panels in Gujarat. “SunEdison has been scaling up in India, especially in wind. In May, they acquired two renewable energy portfolios totalling 140 mw. This includes the India wind portfolio of around 100 mw of Spain-based FersaEnergias Renovables SA,” said an energy consultant who tracks the space.

“Globally too, they are adding to their wind portfolio significantly through buyouts,” he added. 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 this sector. That acquisition will expand SunEdison’s project installation pipeline for 2015 by an estimated 500 mw. In addition, it will also expand the total capacity of TerraForm Power’s generating portfolio by more than 50%.

TerraForm Power is an indirect subsidiary of SunEdison. Continuum, however, is their boldest move so far. Morgan Stanley 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 with global utility firms like GDF and some from Malaysia and Thailand did not progress much. More recently, Malaysia’s SWF Khazanah and IFC – an existing lender of the company – had also evaluated the opportunity.

“SunEdison offer is very rich and has surprised most. They are a significant force globally and have big plans here. In case the talks fail at the last minute, Khazanah and IFC could be the fallback options,” said an official.

The government’s focus on renewable energy stems from the fact that India has an energy import bill of around $150 billion, expected to reach $300 billion by 2030. India imports 80% of its crude oil and 18% of its natural gas requirements. The government aims to effect a 10% cut in energy imports by 2022 and a 50% cut by 2030.