The assets, located in Punjab, Karnataka and Uttar Pradesh, have long-term power purchase agreements (PPAs) with various state electricity distribution companies.
The debt-ridden Essel Group, controlled by Subhash Chandra, has entered into an agreement with Adani Green Energy to sell its 205-MW operating solar assets at an enterprise value of Rs 1,300 crore. On March 8, FE had reported the company was in talks with Adani and CPPIB for sale of its 685-MW solar portfolio on a piecemeal basis. The company is further working to close the divestment of additional 480-MW solar asset portfolio, the company said in a statement.
The assets, located in Punjab, Karnataka and Uttar Pradesh, have long-term power purchase agreements (PPAs) with various state electricity distribution companies. The Essel Group promoter’s debt was at Rs 11,000 crore, of which Rs 4,224 crore was reduced post the Oppenheimer deal, bringing the figure down to Rs 6,776 crore. With the latest announcement, the debt will come down further.
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Essel Group’s spokesperson said, “Our asset divestment process is well within the purview of the agreed timelines with our esteemed lenders. The sale of the group’s solar assets to AGEL is yet another positive step taken in this direction. We have maintained a constant process of identifying the right potential partner for the sale of our precious infra assets.”
The divestment process for the entire solar portfolio of Essel Infraprojects and Essel Green Energy has been delayed, for reasons attributed to delay in installation of excess overloading capacity (over and above lender sanctioned capacity) and due to ongoing negotiations with the prospective investors on the revised deal value, Brickwork Ratings said recently.
The sale of the entire capacity of 685 MW of installed and under-construction projects at Rs 7 crore per MW is likely to fetch Essel around Rs 4,795 crore. The drop in tariffs from the high of Rs 12 per Kwh in 2011 to Rs 2.44/kWh currently has led to consolidation in the renewables industry in India, leading to exit of smaller companies.
Essel’s solar assets are comparatively older with higher tariffs and power purchase agreements (PPAs) for as high as Rs 8/kWh and an average tariff of Rs 5.50/kWh. Although higher PPAs give comfort to investors, a lot of discoms have gone back on older contracts with higher tariffs. Hence, there have been issues of valuations while selling their projects or during mergers and acquisitions.
“The group remains focused towards its commitment made to its lenders and is furthermore confident to complete the overall repayment process,” an Essel spokesperson said. The group plans to pay off its entire debt of Rs 17,174 crore to lenders by September 30 through the divestment of its various road, transmission and solar assets apart from stake sale in other listed entities like ZEE Entertainment.