Renewable energy company Greenko Energy has signed a definitive agreement to acquire AT Capital-backed Orange Renewables, Singapore, for a total enterprise value of $922 million. The deal comprises 907 MW of solar and wind assets and pipeline assets of over 500 MW. Besides, the company also announced its decision on a primary equity raising of $447 million from an affiliate of GIC and an entity that is wholly-owned by the Abu Dhabi Investment Authority (ADIA).
“The proposed acquisition of Orange Renewables assets is expected increase capacity, revenue, Ebitda growth and drive overall earnings growth potential for Greenko and its stakeholders. Indian energy markets are transitioning from deficit markets to demand-driven contracts requiring reliable, flexible and cost-competitive energy. Greenko is focussing in building integrated renewable energy assets with storage to address these markets by competing with conventional energy assets like thermal in quality, quantity and cost,” Anil Chalamalasetty, managing director and CEO, Greenko said in a statement.
Following the deal, the company will add about 907 MW operating and near-completion assets to Greenko’s existing portfolio of over 3 GW operational capacity, taking the overall operational capacity to about 4 GW of well-diversified and derisked portfolio of wind, solar and hydro. The company’s overall under-construction capacity in addition to the 4 GW operational capacity is over 7 GW, taking its total operating capacity to about 11 GW, clearly establishing leadership position in the Indian renewable energy sector.
The deal is accretive to Greenko’s Ebitda upon closing, approximately $130 million accretive in the first full year after close, with additional accretion and growth anticipated thereafter. Greenko is focused on building utility scale assets with them being diversified on the basis of offtake, geography and technology. It intends to increase the installed capacity by developing and building new greenfield assets as well as making selective acquisitions which enhance shareholder value.
Greenko has achieved 3000 MW of operational portfolio and over 7 GW under-construction capacity and is well-funded to grow into a multi-gigawatt portfolio over the next few years.
Wind energy capacity addition is estimated at about 3-3.5 GW in FY2019 and the viability of bid tariffs and inter-state connectivity will be key headwinds for developers, ratings agency ICRA said today. The project awards so far are expected to improve the capacity addition in the wind power segment to about 3 to 3.5 GW in FY2019 against 1.7 GW in FY2018, ICRA said in a statement. The Ministry of New and Renewable Energy (MNRE) along with the distribution utilities in Gujarat, Maharashtra and Tamil Nadu have awarded wind-power capacity of 7.6 GW over the past 15 months and another 10 GW each are proposed to be awarded in FY2019 and FY2020.
This is in line with the trajectory of project awards announced by the MNRE in November 2017 to achieve the cumulative wind capacity target of 60 GW by FY2022. “However, on a cautious note, the winning bidders in these auctions face the twin challenges of project viability at the quoted tariffs and securing connectivity and long-term access to inter-state transmission network.
“While the regulations recently notified by the Central Electricity Regulatory Commission (CERC) on connectivity for renewable energy projects are positive for these developers, the adequacy of the existing inter-state transmission infrastructure in the states with high wind potential remains a challenge,” said Girishkumar Kadam, Sector Head and Vice President, ICRA Ltd.
The connectivity regulations recently notified by the power regulator CERC provide clarity on the procedure and timelines for securing connectivity from the central transmission utility and accord priority to projects holding a letter of award under the tariff-based competitive bidding. However, it said the uncertainty on availability of adequate evacuation infrastructure persists, given that the existing inter-state transmission infrastructure in the states with high wind potential may not be sufficient to provide connectivity to the projects bid out so far and proposed bids by the SECI.
Moreover, its said the augmentation of transmission infrastructure would take about 24-36 months, whereas the winning developers must commission the wind power projects within 18 months from the date of award. The significant decline in order volumes during the transition from feed-in tariff regime to competitive bidding regime, coupled with pricing pressures, had an adverse impact on the financial profile of the wind turbine manufacturers.
“This remains a concern for the wind power IPPs using the services of such players as O&M contractors, given that the weakening of the financial profile would affect their ability to ensure machine availability for the wind farms,” said Vikram V, Associated Head and Assistant Vice President, ICRA Ltd.
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The growth in the solar rooftop segment has not been significant, and the government may find it difficult to achieve the target of installing 40 gigawatt (GW) of capacity by 2022, say experts. The government has set a target to install 100 GW of solar capacity by 2022, out of which 40 GW has to come from rooftop projects. However, the country has managed to set up just over 2 GW of solar rooftop capacity so far, while the target for just financial year 2017-18 was 5 GW, according to the data from the ministry of new and renewable energy.
“Rooftop projects can’t be added in that quantity as a lot of structures built were not designed for setting up such projects. People are not used to open space deficiency, so it will be tough to do it in the quantity envisaged by the government,” Solar Power Developers’ Association president Vineet Mittal told PTI.
Anmol Jaggi, founder and director, Gensol group, said, government establishments and commercial buildings like malls or even warehouses have the capacity to install such projects, but it’s difficult on residential buildings, especially considering the structures that are being developed today. But the concern remains about grid connectivity and metering, according to him, as most warehouses don’t use the total power they generate, which in that case becomes imperative to pump into the grid.
“To achieve the target of 100 GW, government will have to find some alternate sources as 40 GW through rooftop alone seems difficult,” Jaggi said. Experts believe gross metering PPA’s with solar rooftop farms on warehouses should be adopted for supplying or supplementing discom requirements in the urban and industrial load clusters.
Floating solar projects could be also be a good alternative for the government to meet its 100 GW target due to limitations of land use, according to Sunil Rathi, director, Waaree Energies. “It is expected to develop into a leading segment within the industry given the low deployment costs, reduction in water evaporation and the potential to yield higher energy harvest,” he said.
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