Barclays has been hired by Fortum OYJ, Finland’s state-controlled power utility, to sell a stake in its operational solar power projects in India, according to two people who know about the development.
Fortum is one of the largest nuclear & hydropower generators in Europe and Russia. Fortum seeking financial investors is a representation of the growing alliance in India’s clean energy sector. Given the record low solar and wind power tariffs, the key to success is financing at the lowest cost in market. Fortum plans to invest around 400 million euros in India’s solar sector.
“Fortum is looking at growth capital and hence this mandate to Barclays,” said a person aware of the development requesting anonymity.
The quest for long-term capital by Fortum comes after India witnessed record low tariffs for solar energy up to Rs2.44 per unit in May which rose to Rs2.65 per kWh in an auction held by Gujarat government in September. The tariff provided by NTPC Ltd, from its coal generated projects is higher than the tariffs promised by solar projects in India, i.e. Rs3.20 per unit.
“Barclays is doing the work for Fortum. The plan is to sell significant stake in their portfolio,” said another person retaining anonymity.
At the present time, Fortum is into electricity, heating and cooling businesses in Nordic and Baltic countries, Russia, Poland and India with euro 3.6 billion in annual sales and a market cap of euros 13 billion. The Indian project in Fortum’s solar power project portfolio has 215 megawatt capacity.
Barclays Bank spokesperson declined to comment on this. Fortum India Pvt Ltd managing director Sanjay Aggarwal said in an email, “We do not comment on market speculation.”
“However, as we have said earlier, we are investing 200 to 400 million euros to Indian Solar market and remain committed to develop solar and explore new opportunities and this has not changed,” Aggarwal said. “We can consider taking financial investors alongside us to our operating renewable assets.”
Patient- capital is sought with falling equipment prices and the lower costs of raising finances contributing to India’s record low solar and wind tariffs.
The Fortum utility generated 24.1 terawatt-hours of nuclear power in 2016 which contributes a third of its total electricity production. Moreover, 64% of the electricity produced by Fortum is free from Carbon-Dioxide. Uniper is another power utility, partly owned by Germany’s E.ON AG, in which Fortum has announced to invest euro 18.5 billion.
There are more deals made in India’s clean energy space at a faster pace. Ongoing deal activity includes Subhash Chandra’s Essel Infraprojects Ltd mandating Investec to look for buyers of its solar businesses and Finland’s Taaleri Plc evaluating assets for acquisition in India. Equis Energy is also moving on its sell-off plan, Mint reported on 14 June.
There is no more price gaps between the electricity generated from Indian thermal, solar and wind projects. The primary reasons being costs of solar modules and wind turbine generators falling by 80% and 20% respectively, over the last five years.