The state-owned company formerly known as Gas Authority of India is said to be carrying out due diligence on solar power plants owned by ACME Solar.
It is yet to discuss financial terms with ACME’s shareholders, as per these sources.
“The discussions are at an early stage. The proposal has not been taken up by GAIL’s board”, an executive said.
The state-run player could pick up anywhere between 49-74% stake in ACME Solar holdings if discussions progress towards a deal, according to the sources.
“The talks are open-ended. The deal could involve an investment in the parent company and also separate investments in certain SPV’s that house individual projects”, another executive briefed on the matter said.
GAIL is the largest processor and distributor of natural gas in India.
The company is said to be exploring investments in the renewable energy space as part of a strategy for diversification of its businesses and to create a hedge against volatility in natural gas prices which are linked to crude oil.
Spokespersons for GAIL and ACME Solar declined comment when contacted.
ACME Solar’s portfolio of 5.8 gigawatts places it amongst the largest standalone solar power generation companies in the country and could be worth over $1.6 billion, as per industry experts.
GAIL has a tie-up with state-owned BHEL for setting up renewable energy projects and also provides financial support to startups who are setting up businesses related to clean energy.
It was also amongst contenders to buy IL&FS’s wind power projects that were put up for sale as part of a plan for financial reconstruction of the debt-ridden non-bank finance company.
ACME Solar has a pan-India portfolio of solar power generation plants covering twelve Indian states. It’s operational plants produce nearly 3 gigawatts of solar energy which is supplied to state electricity boards with whom it has long term power purchase arrangements some of which extend upto 25 years.
The company is also in the midst of setting up new solar plants that have the capacity to generate a further 2.8 gigawatts of power. It generated free cash flows of Rs. 800 crore in the current fiscal leaving it with ample liquidity after accounting for its capital expenditure.
Pension funds, private equity players and global strategic investors have also explored the possibility of investing in ACME Solar or purchasing some of its assets after it shelved a planned initial public offering of shares (IPO) a few years back.
State-owned energy companies are increasingly pursuing inorganic growth opportunities. National Thermal Power Corporation recently outbid Adani group in a bidding process for the purchase of Avantha’s group’s power plant in Madhya Pradesh. Similarly, National Hydroelectric Power Corporation acquired a power plant from Lanco group last year after winning in a bidding process.
