Actis LLP has agreed to buy Essel Infraprojects Ltd’s solar power projects for ₹5,500-6,000 crore, according to two people involved in the deal process. The deal would be formally announced by December-end, one of the two people said, requesting anonymity.
Essel Infra, part of media mogul Subhash Chandra’s Essel Group, put its solar assets on the block in early 2018 and has spent most of the year negotiating with potential buyers. Essel has 685MW of installed capacity and under-construction projects.
Essel Infra has comparatively older assets, which were won when prevailing solar tariffs were higher. Essel’s assets have power purchase agreements (PPAs) with state governments for as high as ₹8 per kilowatt hour (kWh) and the average PPA for the assets is at ₹5.50 per kWh, the person said.
Investors in the sector are willing to pay a premium for PPAs with higher tariffs. “Developers and investors take inordinate risk when investing in renewable projects because the technology in modules and solar panels becomes outdated very quickly. So, higher PPAs give some comfort when making investments.
Essel Group will exit its renewable energy and power transmission businesses. The group wants to expand its footprint in emerging sectors such as water, railways and municipal solid waste, and expects the asset sales in the renewable energy and transmission business will fund the growth of its new businesses.