Why India’s largest renewable energy producer wants to sell its assets in Karnataka

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Published: May 13, 2020 2:10:32 AM

The company is likely to raise Rs 1,500 crore through the sale at a valuation of Rs 5 crore per megawatt, the people said.

ReNew has a total of 4.9-GW operational wind and solar assets across eight states.ReNew has a total of 4.9-GW operational wind and solar assets across eight states. (Representative image)

ReNew Power, India’s largest renewable energy IPP, is in talks with more than half a dozen domestic and international investors to sell its 300-MW solar assets in Karnataka, as the company faces the heat of tariff renegotiation in Andhra Pradesh and issues of pending receivables from loss-making discoms.

According to people in the know, “ReNew is in talks with GIC and CPPIB among various other investors to sell their 300 MW solar assets in Karnataka, where 30% of their assets are located. The company is looking for cash to deploy in its under construction and upcoming projects of around 3,000 MW capacity.”

The company is likely to raise Rs 1,500 crore through the sale at a valuation of Rs 5 crore per megawatt, the people said.

Emails sent to ReNew Power and GIC did not elicit any response till the time of going to press, while CPPIB spokesperson in a mailed response said, “We do not comment on market speculation or rumours.”

ReNew’s 717-MW wind and 70-MW solar projects were put on hold by the YS Jagan Mohan Reddy-led government in Andhra Pradesh, which refused to recognise all high-cost renewable PPAs signed under the previous regime at tariffs above Rs 2.44/kWh. The majority of ReNew projects in Andhra Pradesh have tariffs above Rs 5/kWh. The matter is before the Andhra Pradesh High Court pending final judgement. However, the company is getting paid now after the high court mandated discoms to pay at the suggested tariffs till the matter gets resolved.

Also, ReNew along with other developers has long pending receivables of over six months from Tamil Nadu, Andhra Pradesh and Telangana discoms, which is likely to further aggravate liquidity position if the lockdown continues further.

ReNew has a total of 4.9-GW operational wind and solar assets across eight states. In Andhra Pradesh, the portfolio comprises of 717-MW wind project and around 70-MW solar projects.

In Karnataka, where the company is selling 300 MW of solar assets, 640 MW is wind while 650-MW capacity is solar. Most of these solar projects have a tariff between Rs 4.5/kWh and Rs 5/kWh.

Around 3,200-MW projects are in the pipeline, according to their website.

Fitch Ratings has cut ReNew’s plant load factor (PLF) expectations by 5% due to lower power demand during the lockdown, and has also forecast an increase in pending receivable days by 90 days to 201 days for FY21, to factor in payment delays from off-takers, including discoms and direct-sales customers.

The rating agency believes that ReNew has readily available cash and cash equivalent of `4,100 crore as of March 31, 2020 against the current debt maturities of Rs 2,700 crore, but “the significantly higher PLF reduction or increase in receivables could lower the liquidity buffer, as we expect the company to generate negative free cash flow in the near-to medium-term due to ongoing capacity additions”.

ReNew Power was founded by Sumant Sinha in 2011 and backed by investors including Goldman Sachs and Canada Pension Plan Investment Board.

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