Adani Green Energy Limited signed a share purchase agreement on Wednesday to acquire SB Energy India from its shareholders, Soft-Bank Group and Bharti Enterprises, swooping at the opportunity within seven days of the failure of previous negotiations with Canada Pension Plan Investment Board.
The transaction will make AGEL, already the largest listed renewable power company in the country by capacity, one of the largest in the world. The company estimates that upon completion, its operating portfolio will bulk up to 10 GW (10,000 MW) by next year with another 15 GW under development.
SB Energy India has a total renewable portfolio of 4,954 MW spread across four states in India and the transaction marks the largest acquisition in the renewable energy sector in India. The transaction values SB Energy India at an enterprise valuation of approximately $3.5 billion (₹26,000 crore), the company said in an official statement.
Although not disclosed, the EV figure includes $2.9 billion (₹21,100 crore at ₹74/$ exchange rate) of debt and liabilities — around $1.3 billion (₹9,500 crore) of SB Energy’s debt and another $1.6 billion (₹11,700 crore) of pending capex — that will get transferred to AGEL as part of the transaction.
Sources said Adani will actually be paying a nearly $50-60 million discount to the CPPIB offer that got rejected. While CPPIB was buying an 80% stake from SoftBank for $525-550 million (at an implied equity valuation of $656.2-687.5 million for 100%), AGEL is likely to pay $625 million for the entire company.
The Adani spokesperson said, "This is a fully funded acquisition and it is part of our normal capital management planning. Our debt sits under actual SPVs. So, this acquisition will not materially alter the debt profile of AGEL. All of the debts sit within the companies and they are properly funded in a ring-fenced manner, so our balance sheet rises but it does not change our debt matrix."
SoftBank, Bharti also declined to comment on specifics.
Both SoftBank and Bharti will be exiting the high-profile venture at a loss, believe industry players. The sale price is much below the $800 million book value or equity invested by the two since 2015 and a far cry from the $1.2 billion originally sought from investors a year back. Bharti alone had invested $150-160 million in the venture till date since its inception.
"India, without any doubt, has been one of the few nations that has accelerated its global commitment towards climate change and we intend to do our part to execute on the promises made," said Gautam Adani, chairman, Adani Group. "The renewable energy platform that we are building will lay the foundation for attracting several other global industries that are increasingly looking to reduce their carbon footprint (as well as lay the foundation for opening up adjacent platforms that include hydrogen and storage)."
Sources in the know say the deal is expected to get completed by August this year. "That’s when the long-stop date for negotiations has been set. Regulatory approvals are required as the change of control clause in the various power purchase agreements will get triggered," said an official, on condition of anonymity as the talks are in the private domain.
All SB Energy projects have 25-year PPAs with sovereign rated counterparties such as Solar Energy Corporation of India, NTPC and NHPC. The operating assets forming part of the portfolio are primarily solar park-based projects.
"SBG continues our transition to a global investment holding company focused on accelerating the deployment of artificial intelligence; we believe now is the right time to bring in the Adani Group to help drive the next phase of SB Energy India’s growth," said Masayoshi Son, chairman, SoftBank Group.
The transaction with Adani is believed to have been spearheaded by Sunil Mittal, chairman of Bharti Group. "He was dealing directly with Gautam Adani; even the operating team in SB Energy did not know and in typical fashion, they moved in real fast," according to an official with direct knowledge of the matter.
Last December, CPPIB had signed a Share Purchase Agreement with SoftBank to buy their controlling stake for $425-450 million. An additional $100 million were to be paid subject to future outcomes, said people aware of the development.
CPPIB, however, was not keen on a full buyout and wanted Bharti to stay invested.