Sunday, April 11

Global PE funds eye green energy business of IL&FS

Global private equity funds Actis, I Squared Capital, Lone Star Funds and Canada Pension Plan Investment Board (CPPIB), the country’s largest pension fund manager, are interested in buying the renewable energy business of Infrastructure Leasing & Financial Services, three people with knowledge of the development said.

The group’s renewable energy business, which will have about 1,300 MW of capacity once all projects are developed, is being valued at about Rs 2,500 crore.

“Four PE investors have shown initial interest in the assets and we are talking to them… they will carry out due diligence and bids will be invited soon,” said one person involved in the process. The newly appointed board of IL&FS, headed by Uday Kotak, put the renewable energy assets on the block on November 29 as part of a plan to raise funds and repay lenders. IL&FS owes about Rs 91,000 crore to local lenders and mutual funds.

IL&FS has operational wind power assets of 875 MW and 104 MW of wind farms under construction. The group’s solar plants are under construction and will be able to generate about 300 MW

The energy assets are in Rajasthan, Gujarat, Maharashtra, Tamil Nadu, Karnataka, Madhya Pradesh and Andhra Pradesh. The renewables business is 49% owned by Japan’s Orix Group, which has the right of first refusal and has also put its stake on the block. Orix owns aquarter of parent IL&FS Ltd.

Emailed queries to spokespersons of Lone Star and I Squared Capital did not elicit any response. IL&FS and Actis spokespersons declined to comment on the matter. A spokesperson for CPPIB declined to comment on market rumours and speculation.

“Even though the wind and solar assets of IL&FS are in key locations and the power purchase agreements with state electricity providers are in place, the debt pile remains a concern and hence the equity value has been wiped out,” said another person with knowledge of the development. Sequential rating downgrades of the firm led to erosion in the equity value of its assets.

The assets will be sold on an individual basis, depending on location, capacity generation and long-term viability.

“Currently, the investors have indicated that they would purchase specific assets and are not interested in a bundled deal,” the third person involved in the deal said.

The board appointed Rajeev Gupta-led Arpwood Capital and JM Financial as financial advisers to help monetise the assets. Global consulting group Alvarez & Marsal is also helping the group.

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