Oil and gas firm Royal Dutch Shell has surfaced as a surprise applicant for Sprng Energy, which is a renewable energy (RE) platform set up by Actis- a leading investor in growth markets, in India.
Along with Shell, the world’s largest liquefied natural gas trader, competing will be Canadian pension fund CPP Investment Board (CPPIB) and Australian infrastructure fund Macquarie, for a takeover that might cross a billion-dollar.
After an initial round of screening from a list of over 20 possible applicants who had signed non-disclosure agreements, all three were selected last week. Shell’s non-binding stock bid of $1.2 billion is said to have beaten all others. Sprng Energy is known to have a total debt of $960 million on its assets.
Actis has appointed Bank of America to officially begin the selling process for Sprng Energy. This is Actis’ second platform, following the sale of Ostro Energy, its initial green power platform, to ReNew Power Ventures in 2018 for $1.5 billion.
Sprng Energy has inked power purchase agreements (PPAs) for 2.6 gigawatts (GW), of which 2.1 GW will be functional by March 2022 and another 600 MW by March 2023. The EBITDA for all contracted assets in FY22 is estimated to be $220 million.
The firm has increased its portfolio by acquiring assets with a throughput of 600 MW from Acme Cleantech in 2021 and the Shapoorji Pallonji Group’s 194 MW solar energy portfolio in 2019.
According to a previous Investment Information and Credit Rating Agency of India (ICRA) analysis, Sprng Energy will continue to gain profit from its documented operating track record, and the availability of long-term PPAs at cost-competitive rates with strong counterparties, like SECI, NTPC, and Gujarat Urja Vikas Nigam Ltd (GUVNL), for a significant share of the company’s portfolio on a cumulative basis.
Oil and gas supermajors, like Shell, have been under increased pressure from investor activists advocating for change, with more people voting for climate-related resolutions than ever before.
In February last year, Shell announced its approach for achieving its goal of becoming a zero-emissions energy company by 2050. Shell established a target of reducing absolute emissions to half by 2030, compared to 2016 levels, which covers all Scope 1 and 2 emissions.
It purchased Savion, a US-based solar and energy storage firm, from Macquarie’s Green Investment Group in December to extend its worldwide solar portfolio as part of the quest to achieve net-zero emissions.
Shell, on the other hand, has little involvement in the Indian clean energy sector, owning just approximately 49 percent of Cleantech Solar Energy, a solar power producer. In 2019, Shell’s subsidiary Shell Eastern Petroleum Ltd purchased a 49 percent share in Cleantech Solar.