08/03/2018 With $1-billion cheque, Greenko closes in on Orange Renewables - The Economic Times

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With $1-billion cheque, Greenko closes in on Orange

Renewables
BY MOHIT BHALLA & ARIJIT BARMAN, ET BUREAU | UPDATED: MAR 08, 2018, 08.16 Post a Comment
AM IST

NEW DELHI | MUMBAI: Greenko, backed by Singapore’s GIC and Abu Dhabi Investment
Authority, is close to striking a deal to purchase wind and solar energy producer Orange
Renewables for an enterprise value of about $1 billion, said people with knowledge of the
matter.

Having entered into exclusive negotiations with Delhi-based Orange, Greenko is likely to
make a formal announcement by this month-end, said the people cited above. The
acquisition, if it goes ahead, will help the Hyderabadheadquartered company increase its
operating portfolio to about 4 gigawatts from 3.2 gw, making it the largest clean energy
provider in the country, overtaking ReNew Power, which has a commissioned and planned
capacity of 3.2 gw of wind and solar projects.
Renewable energy accounts for 15% of India’s total
energy generation capacity of 300 gw, according to
Orange is owned by Singaporebased AT Capital, a fund that has India-born billionaire the latest government estimates.
Arvind Tiku as its primary sponsor. Based in Russia, Tiku made his fortune in the Central
Asian oil and gas industry. Big Change:
The end of Five-Year Plans: All you need to know

The company was put on the block around a year ago. Investment bank Rothschild
represents the sellers. Greenko entered the picture after ReNew withdrew following initial talks. Hero Future Energies, Sembcorp India
and PE fund Actis were said to be among the other contenders in the fray.

Greenko declined comment on what it characterised as speculation. Orange Group CFO Sanjay Bakliwal didn’t respond to queries.
Orange has 750 megawatts of operational wind and solar generating plants in five states — Andhra Pradesh, Karnataka, Madhya
Pradesh, Rajasthan and Maharashtra. Another 250 mw is in the pipeline.

Additionally, Orange has permits for another 1 gw of projects. Greenko is expected to buy the holding company that owns all the assets.
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The equity value of the company is likely to be about $350 million and it has debt of around $650 million, said the people cited above.
“Large-scale, pure-play renewable companies like Greenko are banking on their operating experience, ability to generate efficiencies
and wide balance sheets to make bold acquisitions,” KPMG partner Anish De told ET.

“Smaller players will find it difficult to stand up against the big boys in competitive bidding, which is why consolidation is inevitable in the
industry.”

GREEN(KO) TO ORANGE

Greenko has raised more than $2 billion through equity and debt in the past 18 months. It acquired SunEdison’s portfolio of solar
projects for about $300 million two years ago. It also attempted an acquisition of Reliance Infrastructure’s electricity distribution
business, ET reported in August last year. The Adani Group eventually purchased that business.

Greenko’s operating portfolio is believed to have generated around $450 million EBITDA (earnings before interest, taxes, depreciation,
and amortisation) in FY17, likely making it one of the top five private sector owners and operators of power assets across all verticals
(coal,
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08/03/2018 With $1-billion cheque, Greenko closes in on Orange Renewables - The Economic Times

Rival ReNew Power, which has raised more than $850 million in equity funding from a variety of investors such as Goldman Sachs, Abu
Dhabi Investment Authority and Japan’s JERA Co, had also held discussions to acquire Orange’s portfolio. The renewable energy
player is preparing for an initial public offering (IPO) later this year.

Tariffs for wind and solar power have declined to levels that make sources of energy such as thermal power, according to industry
experts. The costs of commissioning renewable energy capacity have also come down proportionately though challenges such as
storage and supply over a sustained 24-hour period still need to be addressed, these experts said.

“The renewable bids are taking place at prices below the cost of debt. Greenko has stayed away from auctions and instead has grown
through a combination of M&A and large-scale, complex greenfield projects,” said an executive tracking the company, on condition of
anonymity.

The average feed in tariff for the operating Orange portfolio is around Rs 4-5 per unit. Of the 750 mw, 200 mw is solar and the rest is
wind. The projects in the pipeline, mostly won through recent wind auctions, have an average tariff of Rs 2.70 per unit. The projects
have turnkey contracts with Gamesa and Suzlon. The solar foray has been more recent with a maiden project in Maharashtra as of now.

Renewable energy accounts for 15% of India’s total energy generation capacity of 300 gw, according to the latest government
estimates.

Orange founder Tiku has interests in oil and gas, property and renewable energy, held through his private holding outfit AT Holdings.
Tiku left India at age 18 to study mechanical engineering in Russia and worked as a commodities trader before branching out on his own
in oil and gas in Kazakhstan. Among other businesses, he owns a minority stake in London-listed Kazakh oil explorer Nostrum Oil & Gas
along with steel magnate LN Mittal and Kazakh billionaire Timur Kulibaev, son-in-law of President Nursultan Nazarbayev.

In 2010, he and Kulibaev became embroiled in a criminal case linked to the sale of Kazakh oil assets to the Chinese, but a Swiss court
cleared them of all charges three years later. Mittal recently divested his economic interests in Tiku’s entities.

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