10-Feb-2022 | Market Research Store
Royal Dutch Shell, an oil and gas major, has come out as a surprise bidder to acquire an Indian renewable platform of Actis Llp, Sprng Energy. Shell is the largest liquefied natural gas trader globally and will be in competition with the Australian infrastructure fund, CPP Investment Board, and Macquarie and Canadian pension fund for a billion-dollar and more buyout. All these candidates were shortlisted after the first round of screening from the list of 20 potential candidates that were competing and signed a non-disclosure agreement.
The $1.2 billion on non-bidding equity by the Shell is likely to have trumped other candidates in the queue. However, the debt on the asset is $960 million. Also, the above-mentioned shortlisted candidates are due to submit their bidding offers in around 6 to 8 weeks.
The growing market private equity organizational Actis has instructed Bank of America to write the sale process for Sprng Energy. However, this is the second platform that Actis had built after sales of its green power platform renew – Ostro Energy at an enterprise value of $1.5 billion to ReNew Power Ventures in 2018.
Sprng Energy agreed to a 2.6 GW power purchase agreement of which 2.1 GW will be operational by March 2022, with another 600 MW to be operational by March 2023. In addition, the EBITDA for all the contracted assets for the financial year 2022 is expected to be at $220 million.
The platform was created by Actis fund with the commitment of $475 million equity in March 2017. The company has created its portfolio by taking over 194 MW solar energy portfolio of Shapoorji Palan Ji group in 2019 and an asset capacity of 600 MW from Acme Cleantech.
"It is a good portfolio with PPAs with good counterparties like SECI, NTPC, Gujarat Urja Vikas Nigam Ltd (GUVNL)," said the CEO of a competing green platform who evaluated the asset, on condition of anonymity. "But the valuation of the pipeline has been a challenge for many. Domestic players are aware of the headwinds. For example, in Andhra Pradesh they have invested around $150 million in a 250 MW project (and) issues with the state government are not yet fully resolved."
The chief minister of Andhra Pradesh – Jagan Mohan Reddy, has ended several contracted projects within the state due to the high traffic and corruption activities in 2019. However, the matter is still tied up between the legal battles.
As per last year's report from ICRA, Spring Energy will keep on taking advantage of its demonstrated operating track record along with the presence of PPS at cost-competitive tariffs for long-term with strong counterparties for a huge portion of the company's portfolio.
In addition, all the oil and gas leading companies, including Shell, are under pressure from investors' activities pushing power change due to climate-related resolutions.