Adani Green Energy’s acquisition of SB Energy is the largest deal in India’s renewable energy sector, valuing the company at ₹26,000 crores ($3.5 billion). This is great news for India, which currently has one of the largest renewable energy addition programs with targeted capacity addition of 175 GW by 2022 and 430 GW by 2030, according to the Ministry of Power and Ministry of New and Renewable Energy, India.
The country’s highly-publicized National Solar Mission announced in 2012, followed by revision of solar energy capacity expansion to 100 GW by 2022, witnessed the entry of many players. These new market entrants were keen to ride the wave of decarbonization, sustainability, government plans of reducing dependency on fossil fuel for energy generation, and thrust on renewable energy. In addition to the increasing competition the sector faced, there were also other challenges like delays in payments by distribution utilities, regulatory delays in the adoption of tariffs, and reverse auction bidding driving bid prices extremely low.
The onset of the COVID-19 pandemic in 2020 further aggravated the financial condition of several renewable energy project developers. A sharp decline in economic activity and power demand meant that distribution utilities were either delaying payments or were hesitant to sign new power purchase agreements, thereby severely affecting the project developer’s financial position and capability to execute new projects.
This resulted in several renewable energy developers either partially selling stakes to raise funds, or completely selling off their renewable energy operational assets to deleverage their balance sheets or exit the sector completely (in cases where renewable energy was a non-core business). Despite the challenges, there has been a continuous investor interest in India’s green economy. This is resulting in consolidation within the sector where the big players are leveraging their financial might and available liquidity for inorganic expansion.
The SB Energy acquisition augurs well for Adani Green’s ambitious growth plans through both organic and inorganic expansion. Adani Green has ambitions of being the world’s largest solar energy renewable company by 2025 and a global renewable company by 2030 and targets to build a renewable energy capacity of 25 GW by 2025. The company has been on an acquisition spree and has acquired several renewable energy assets recently, including Sterling and Wilson (renewable projects built through 2 separate SPVs in Telangana, in March 2021), Toronto-based SkyPower Global (50 MW assets in Telangana in March 2021), and Spinel Energy and Infrastructure (20 MW in March 2021) to fuel their capacity expansion plans. The acquisition of SB Energy boosts Adani Green’s portfolio by 4.9 GW, taking its total renewable energy capacity to 24.3 GW, which is very close to the targeted 25 GW capacity four years ahead of schedule. This acquisition demonstrates Adani Green Energy’s intent to be a renewable leader globally and makes it one of the largest renewable energy platforms in the world.