Solar Units | Business Upturn

ReNew Power in talks to sell wind and solar assets to GAIL: Sources

Divya Joyce — Sat, 21 Nov 2020 09:57:52 +0000

According to The Economic Times, ReNew Power is in talks to sell wind and solar assets to GAIL for Rs 3,000 crore. Both sides have engaged advisers to take the discussions forward.

The green energy supplier has carved out a group of wind and solar assets in the north and central India for sale. These have a combined capacity to generate 700 MW of power. ReNew Power has a total generation capacity of 8.65 gigawatts (GW).

“They have arrived at a high-level understanding of the deal. The final closure will depend on satisfactory due diligence and agreement on valuation,” an executive aware of the discussions said.

If the talks were to progress into a transaction, this would be the second tranche of an asset sale by ReNew Power after it recently divested some of its power assets in Karnataka to UK government-backed Ayana Renewable for ₹1,600 crore as part of its ongoing monetization drive to deleverage its balance sheet.

GAIL, which was formerly known as Gas Authority of India Ltd, has been targeting renewable energy assets as part of a diversification strategy.

“As a part of growth strategy, GAIL is continuously looking for business opportunities including renewables through M&A and/or develop RE (renewable energy) plants through bidding route for both organic as well as inorganic growth,” a spokesperson for GAIL said. “However, GAIL is unable to provide comments on any specific opportunity due to confidentiality of issues.”

The state-owned company is the largest transporter of gas in the country with a network of 12,426 km of gas pipelines. The company transports 70% of all gas shipped domestically.
ReNew has been looking at asset sales as part of a strategy to ‘churn capital’, as per sources close to the company. The company will sell legacy assets and realize gains from these older investments with an objective to redeploy the proceeds into new projects, these sources said.

Industry observers also pointed that cash flows of state-owned power distribution companies (discoms) have been adversely impacted due to the pandemic as power demand in the commercial and industrial segment has fallen and recoveries from customers have been hurt due to overall stress.

This has led to increased suffering for power generation companies like ReNew Power, which depend on timely payments from the discoms.

Discoms’ outstanding dues to power generation companies rose 28% year-on-year in September to Rs 1,38,749 crore, according to power ministry data. This was despite the government announcing a Rs 90,000 crore liquidity infusion package for the electricity distribution companies that have been dispensed through Power Finance Corporation and REC.

ReNew’s debt position is also an area of focus for the company, according to sources. The company has a debt burden of Rs 24,000 crore. Almost half of its revenues of Rs 4,790 crore in the financial year 2018-19 went towards meeting finance costs on loans, the company’s balance sheet shows.

However, the company is well capitalized with over Rs 7,000 crore of total equity. It also reported a Rs 100 crore profit for the financial year 2018-19.

“Your company will be selectively making investments in the renewable energy domain given the future growth potential and also to partner with government in meeting India’s INDC (Intended Nationally Determined Contributions) commitments on climate change”, GAIL said in its latest annual report published on its website.

GAIL is cash-rich and has low debt levels. It has reserves of Rs 40,000 crore. It reported sales of Rs 74,000 crore in the financial year 2019-20 and profits of nearly Rs 10,000 crore.

This story has not been edited by BU and is published from a syndicated feed.

Adani’s $6 billion solar project has no guaranteed buyer: Report

Sarthak Yadav — Thu, 19 Nov 2020 09:39:55 +0000

According to a report via Reuters, India’s main solar-adoption agency Solar Energy Corp of India Ltd (SECI) revealed that the $6 billion solar power project which was announced in June with Adani Green Energy has no guaranteed customer. It may expose the company to higher financial risk.

Gautam Adani’s shares have soared three-fold since the signing of the 8 gigawatts (GW) multi-plant deal, which Adani announced as the “largest of its type, ever” and a landmark for India.

The agreement between Adani Green and Solar Energy Corp of India Ltd (SECI) as reported earlier revealed that the agency has no “legal or financial obligation” to support the project if SECI fails to find buyers.

This would be the first major SECI project without a state-guaranteed Power Purchase Agreement (PPA), which analysts say has been key to building up India’s renewable energy sector.

When SECI floated the tender for the project in June 2019, it had said a PPA would be assured, but it withdrew the clause guaranteeing purchase in the deal signed a year later.

Adani Green has said 2 GW of generation capacity will come onstream by 2022, while the rest will be added in annual 2GW increments through 2025 as a part of the contract.

SECI is uncertain about finding buyers for the Adani project which is a process which takes months. Auctions conducted by SECI are usually the primary method to attract greater participation because of the assurance of power purchase and payments.

But the lack of such a guarantee could undermine investor and lender confidence, raising financing costs in a market like India where power demand growth has repeatedly fallen short of expectations amid a broader economic slowdown.

Tim Buckley, director at the Institute of Energy Economics and Financial Analysis pointed out that the quality of “federal government-guaranteed contracts with cashflow payment certainty provides investors the confidence to deploy tens of billions of dollars.”

Adani Green has said it would receive interim funding for the project from a consortium of foreign banks, and later with money raised from the capital markets.

It has reassured investors of its ability to tap markets citing its sovereign grade rating.

“We have full visibility and we would be in a position to inform the market shortly,” Adani’s chief financial officer, Kaushal Shah, said earlier this month.

Gautam Adani has said the project can make a profit at the power price of 2.92 rupees ($0.0393) per kilowatt hour (kwh) agreed in the SECI tender. “At 2.92 rupees, there is enough margin available plus we also have the time of 3-5 years to implement this project,” he said in June.

The SECI tender for the project had dragged on for a year with the agency extending deadlines and raising the maximum bidding price to 2.93 rupees/kwh from 2.75 rupees/kwh.

SECI Managing Director J.N. Swain said on Wednesday that the potential buyers of power were consulted and “due processes” were followed during the auction and before signing the agreement with Adani.

Andhra Pradesh solar units get Rs 5,000 crore under-recovery

Chittesh Dalmia — Sat, 18 Jul 2020 10:03:27 +0000

Andhra Pradesh solar units gets lower tariffs of Rs 5,000 crore under-recovery. Solar and wind power plants units in Andhra Pradesh, with aggregate capacity of 8,000 mega watt (MW), have claimed that their under-recovery owing to inadequate tariff payments by the state discoms have reached a staggering Rs 5,000 crore. What has caused the crisis is the state government’s decision to retrospectively amend the power purchase pacts, citing malpractices.

As per Andhra Pradesh High Court’s September 2019 order, the state-owned power distribution companies (discoms) are paying these plants at a provisional rate of Rs 2.43/unit, against the Rs 4.84/unit tariff approved by the state power regulator earlier under the previous state government, leading to the financial stress of the renewable power producers. To add to their woes, the state government is amending its solar and wind power policies, effectively withdrawing the incentives which were offered to these plants earlier to promote renewable energy in the state.

Solar Panels Under Recovery

Suspending older provisions, the state government, led by chief minister YS Jaganmohan Reddy, has asked the electricity regulator to levy transmission and distribution charges for wheeling power for wind and solar plants which sells electricity directly to industrial consumers through the open access mechanism. This can raise power costs by as much as Rs 5/unit (Rs 3/unit wheeling charges, Rs 1.5/unit cross subsidy charges and Rs 0.5/unit distribution charges), rendering these sources unviable for open access consumers resulting in these projects losing customers.

The state government, against the advice of the Union power ministry, had formed a committee to revise “abnormally priced wind and solar” power purchase agreements (PPAs), saying there might have been linked with “malafide intentions” and could have “resulted in unjustified burden on the consumers of the state”. Although the AP High Court had struck down the state government order on renegotiating PPAs, it had asked the state electricity regulator APERC to decide on the matter and directed the discoms to pay reduced prices in the interim period.

Renewable energy producers believe that the state power regulator. And the Amaravati High Court would ultimately mandate paying full tariff to the state’s discoms. And clearing such huge payment immediately will not be possible for the state. Causing further delay in clearing the outstanding bills.

State Government Cuts On Liquidity

“We would therefore request that under the discom liquidity package. There should be a separate carve out of money to the tune of `5,000 crore for AP discoms. So that such amount can be immediately paid to renewable energy generators. Once the court orders are issued on these pending petitions”. The national solar energy federation of India said. In a recent letter written to Union power minister RK Singh.

Singh had earlier said that the move “has alarmed the sector and the investors”. And “if this is not corrected, the FDI will stop coming, the banks will stop financing. And the growth in the renewable energy sector will come to a halt”. Since FY15, FDI in the renewable energy sector has been a whopping $4.8 billion. The state’s decision persuaded the Centre to take steps to ensure sanctity of contracts and regular payments to power producer.

Andhra Pradesh discoms have reported a loss of Rs 16,736 crore. In FY19, up from a Rs 546-crore loss in the previous fiscal. And the state government has blamed high cost renewable energy for its distress. However, audited data has shown that the state clearing only 21% of the subsidies. Claimed by discoms and deteriorating payment collection efficiency. Also played major roles in the spiraling of losses.

Source: Financial Express