ONGC-NTPC combine wins exclusivity to close $800 million Ayana stake sale

State-run Oil and Natural Gas Corp. Ltd (ONGC) and NTPC Ltd have been given exclusive rights to acquire a majority stake in National Investment and Infrastructure Fund Ltd (NIIF)-backed Ayana Renewable Power Pvt. Ltd, said two people aware of the development.

“The exclusivity to ONGC and NTPC bid was given last week. It is for around four weeks,” said one of the two people on the condition of anonymity.

With an equity value of around $800 million, the deal will rank among the largest transactions in India’s green energy space. Standard Chartered is running the sale process.  

The renewable energy company, which has a 5-gigawatt (GW) portfolio of operational and under-construction projects, is looking to offload a significant stake. The deal may even turn into a 100% stake sale.

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It comes against the backdrop of traditional energy companies striving to bridge the gap between being electron and molecule suppliers. To boost their new and renewable energy play, NTPC and ONGC have announced a joint venture company (JVC) through their green energy subsidiaries—NTPC Green Energy Ltd (NGEL) and ONGC Green Energy Ltd (OGL).

“NGEL has submitted an application to the ministry of corporate affairs for the incorporation of a 50:50 JVC with OGL,” the companies said in a 4 November joint statement. “The JVC will also seek opportunities to acquire renewable energy assets,” the statement added.

Mint earlier reported about ONGC entering the fray, with the shareholders also seeking to raise an additional $400 million to finance the company’s growth. Mint also reported that ONGC, JSW Group’s JSW Neo Energy, and Singapore’s Sembcorp Industries Ltd had been shortlisted to submit the binding bids for acquiring a significant majority stake in Ayana Renewable Power after they submitted their non-binding offers (NBOs).

Bengaluru-headquartered Ayana Renewable Power is a majority-owned company of the NIIF. Its other shareholders include the UK government’s British International Investment and Eversource Capital. 

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Ayana plans to build a 10GW portfolio by 2025 and has projects in Andhra Pradesh, Tamil Nadu, Karnataka, Rajasthan, and Gujarat.

Spokespersons for Standard Chartered and JSW Group declined to comment.

In an emailed response, an Ayana Renewable Power spokesperson said, "We do not comment on market speculation.”

“As a matter of company policy, we do not comment on market speculation,” a British International Investment spokesperson said in an emailed response.

Spokespersons for NIIF, NTPC, ONGC, Sembcorp, and Eversource Capital did not respond to queries emailed on Tuesday night.

Green energy investments

Given the changing hydrocarbon energy landscape, ONGC has been aggressively scouting for acquisitions in the clean energy space. ONGC plans to spend ₹1 trillion on green initiatives by 2030 to reduce its carbon footprint as part of a broader effort to achieve net-zero emissions by 2038. ONGC has a renewable energy portfolio of 189 megawatts (MW) as of 2022-23, with plans to ramp it up to 10GW by 2030. 

NTPC has been active in India’s green energy space, with NGEL planning to raise ₹10,000 crore through an initial public offering (IPO). It has a 14.69GW portfolio, of which 2.92GW is operational and 11.77GW is contracted and awarded. It also has a 10.97GW pipeline.

According to experts, such large deals reimpose faith in the country's green energy investment thesis.

“Market confidence has been a bit weak of late as investment needs are growing, but the investors are getting more selective and demanding. As a result, deals are taking even longer to close. Any deal over $500 million that brings new investors is great news for all stakeholders and a further affirmation of strong sector prospects,” said Vinay Rustagi, senior director, global head of renewables, Crisil Ltd.

Mint has reported that opportunities offered by India’s energy transition have induced several deals. India has an installed renewable energy capacity of 210GW, including 90.76GW of solar and 47.36GW of wind power capacity.

Rising power demand

The transition also comes at a time when India’s power demand has been rising.

“Power demand in India is estimated to have risen 0.4% on-year to ~140 billion units (BUs), after two consecutive months of decline. Over April-October, power demand is estimated to have increased ~4.7% on-year,” Crisil Market Intelligence & Analytics wrote in a 4 November report.

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“India's power demand will rise by about 8% in 2024, accelerating from 7.6% in 2023, following an 8.4% increase in the first seven months of 2024," Fitch Ratings said in an October report. "Our forecast is underpinned by India’s robust industrial growth and economy, even as the demand surge caused by the extreme heatwave from May to July begins to moderate,” the report added.

“We also expect the addition of renewable energy capacity to gain significant momentum over the next two to three years. This follows a marked increase in new project auctions, which rose to 70GW in the fiscal year ended March 2024 (FY24) from 20GW in the year-ago period. Fitch anticipates that the economic environment—characterized by stable interest rates and lower equipment prices —will continue to support capacity additions in the next few years,” the report said.

NIIF is sponsored by the Indian government, which holds a 49% interest in it. It primarily focuses on investing in core infrastructure sectors, such as transportation, airports, ports, logistics and roads, green energy, and digital. It manages around $5 billion of equity capital commitments across its three funds—Master Fund, Fund of Funds, and Strategic Opportunities Fund—with investments in sectors such as ports and logistics, renewable energy, roads, digital infrastructure, and manufacturing.