CLP Plans India Solar Entry, Eyes Stake in Suzlon Project

Sunshine Deal Co likely to buy 49% in Telangana unit initially in line with PPA norms
Hong Kong’s CLP Group, the largest overseas investor in Indian power sector, wants a piece of the solar energy action now.CLP (formerly China Light & Power), is finalising its solar debut through an acquisition. It’s local arm is in advanced negotiations to buy stakes in a 100-MW solar park project in Telengana from Suzlon Energy, according to people aware of the talks. CLP India is diversifying its clean energy portfolio after establishing itself as leading wind power generator, with almost a gigawatt operating assets.

If the deal goes through–a formal announcement is expected in a few days, barring hiccups–it will give a big boost to the domestic industry , underscoring global interest in even secondary market brownfield or greenfield growth opportunities.

An estimated 10,000 MW of solar and wind projects are believed to be on the block, seeking equity investments of . 20,000 crore, according to sector ex` perts. India’s solar energy sector has seen record capacity additions while tariff bids for new projects have fallen to unprecedented lows as the government is pushing hard to achieve the ambitious target of 100,000 MW of grid-connected solar power by 2022.

To comply with power purchase agre ement (PPA) norms, CLP India will initially acquire 49% of the project and, a year after its commissioning, take majority control. It may even buy Suzlon out entirely , said people cited above.

Suzlon will, however, remain involved with engineering, procurement and construction work. The ` . 800-crore project needs ` . 150 crore equity , with the rest being financed through debt.

Suzlon, India’s second-largest wind turbine manufacturer, made its solar entry in January by winning rights to set up 210 MW of solar plants in Telangana in this financial year across six projects. Suzlon declined to comment, saying it was in a `silent period’ ahead of its results on May 30.

CLP India said it wouldn’t comment on specific transactions but a spokesperson said the company is looking to increase the proportion of clean energy and non-carbon technologies in its portfolio as part of a global strategy and aims to add 250-300 MW of renewable energy in India every year. The company will continue to expand wind energy portfolio, currently at committed capacity of over 1,050 MW, he said.

“Solar power has experienced great thrust from the Indian government and the favourable policies make the sector attractive and create a conducive environment for us,“ said Mahesh Makhija, director, commercial, renewables, CLP India. “Our strategy is to build a balanced a portfolio by adding solar power to complement our wind capacities.“ He elaborated on the growth strategy for India. “We are focused on accessing various avenues in the market including bidding for projects, joint ventures, industrial markets and pre-bid agreements. However, I cannot comment on specifics at this stage and as a policy we do not comment on speculation.“

CLP entered the Indian power sector in 2002 with the acquisition of a 655 MW gas-fired power plant in Gujarat and is among the few foreign players that have a presence in conventional energy in the country .

It hasn’t participated in the highly competitive bidding that has seen solar tariffs fall to as low as ` . 4.34KW-hr but expects to join in as rates are seen to be stabilising above ` . 5 per unit following recent auctions in Jharkhand, Karnataka or Rajasthan.

Suzlon is using its engineering and project execution skills to duplicate its wind energy business model. “Several EPC players including Suzlon Mahindra Susten, Sterling & Wilson are getting into development with the purpose of bringing on board a generation partner who can develop the project,“ said a person with knowledge of the matter. “That way , both can focus on their core and leverage on each other’s strengths. This will be among the first of its kind JV experiment. If successful, it will offer a template for others.“

Source: Economic Times; 30 May 2016
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