US-based SunEdison, which filed for bankruptcy in April, could find it difficult to sell its power plants in India given several of them are poorly capitalised. Details of the capital structure of some plants accessed by FE show the renewable power firm has infused barely 5% or Rs 100.5 crore of the required equity of Rs 2,010 crore.
SunEdison, which is scouting for buyers for two wind power and six solar power plants, has roped in investment banking firm Rothschild to help it transact deals for a combined wind and solar capacity of 1,318 megawatts (MW). The company which finances, installs, owns and operates renewable power plants has invited offers both for projects that are running — 350MW — and also for those under construction — 960MW.
However, several of the projects suffer from under-capitalisation despite which the firm was signing contracts as recently as three months ago. Details shared by the company with potential buyers indicate a need for an immediate equity infusion of R553 crore.
SunEdison, it may be recalled, filed for bankruptcy after an ambitious and highly-leveraged growth plan came a cropper. In its bankruptcy filing, the company said it had assets of $20.7 billion and liabilities of $16.1 billion as of September 30.
Given how its plants need large doses of equity infusion SunEdison is not in a position to be picky about who it sells to. It is reaching out to both large and small power producers. Among them, Adani Power, has confirmed it is interested in acquiring some capacity. FE learns offers to sell have been made to smaller firms also, some of which are barely 4-5 years old.
The proposed sale of assets, however, could prove to be an arduous task given SunEdison had bid aggressively to win projects.
Jasmeet Khurana, associate director of solar power consulting firm, Bridge to India points out that a large chunk of SunEdison’s portfolio consists of projects won at very aggressive tariffs. “ This will keep buyers from offering much of a premium as the returns from these projects are already squeezed,” Khurana observed.
SunEdison had bid the lowest ever solar tariff of Rs 4.63/unit in November, last year, for a solar park in Andhra Pradesh to be developed by the state-run NTPC. In the following month, however, Finnish company Fortum won projects in Madhya Pradesh at an even lower tariff of Rs 4.34/unit.
SunEdison’s projects, however, have been delayed with the firm not having been able to contribute adequately to the capital base. According to the details furnished by the company, investments in bank guarantees at Rs 252 crore for all the projects have been twice as large as the contribution to equity of Rs 108 crore. It’s possible, experts said, some guarantees may be invoked since power purchase agreements (PPA) stipulate timelines and call for liquidating the guarantees if these deadlines are not met. On an average, PPAs provide 15 months for a ground-mounted solar power project to be completed.
Rotschild has said in a communiqe to prospective buyers their proposal must contain the offer price consideration payable to the shareholders and its affiliates, split by special purpose vehicle (SPV) and premium being ascribed to the projects. “It must provide a background of the acquiring entity and an outline of future strategy for the projects,” the communique said. A query sent to Pashupathy Gopalan, President of SunEdison South Asia went answered.