Introduction

In an exciting development for the renewable energy sector in India, New York-based investment firm Stonepeak has made headlines by being shortlisted as the fourth bidder to acquire O2 Power, a prominent renewable energy platform. This potential $1 billion deal, with an enterprise value estimated at around $2.3 billion, could mark one of the largest green energy transactions in the nation’s history.

Competitive Landscape

Reports from Mint indicate that Stonepeak joins a competitive lineup of bidders, including I Squared Capital, JSW Neo Energy, and Macquarie Group, who have already taken steps to submit binding offers for O2 Power. Sources familiar with the situation note that Stonepeak was informed it had passed the initial qualification phase among the bidders who submitted non-binding offers (NBOs).

Stonepeak's Position

With a formidable $71.2 billion in assets under management, Stonepeak is known for its focus on infrastructure and real assets, positioning itself as a significant player in the investment landscape. A total of seven bidders, including well-known firms like Edelweiss Alternative Asset Advisors' Sekura Energy and Actis LLP, among others, have expressed interest in the sale, which is being orchestrated by Barclays.

O2 Power Overview

O2 Power is currently owned by European alternative asset manager EQT, which holds a 51% stake, and Temasek, owning the remaining 49%. To date, these entities have infused $500 million into the company, which was founded by former executives of ReNew Power. O2 Power aims to cultivate an impressive portfolio of approximately 5 gigawatts (GW) and boasts an existing portfolio of 4 GW.

Bidding Process and Deadline

While representatives from Stonepeak, Barclays, Macquarie Group, and O2 Power declined to comment on the negotiations, it's clear that the competition is heating up. The deadline for submitting binding bids is set for October 19, after which the successful bidder will gain exclusive rights to finalize the acquisition.

Market Context

The deal comes at a time of sustained investor interest in India’s renewable energy market, particularly in the solar sector. A recent report from SBI Capital Markets highlighted an astounding 70% year-on-year increase in deal value within renewables for calendar year 2023. This surge is attributed to consolidation within a previously fragmented industry, where just 27% of the solar generation capacity is held by the top five players, compared to 45% for thermal power sources.

India's Renewable Energy Capacity

Additionally, India boasts an impressive installed renewable energy capacity of 180.79 GW, including 73.31 GW of solar and 44.73 GW of wind power. The government is striving towards a goal of adding 50 GW of green energy capacity annually, with an ambitious target of reaching 500 GW by 2030.

Future Outlook

With India accounting for 20% of Asia’s renewable energy mergers and acquisitions (M&A) deal value in 2022 and 2023, the outlook for 2024 looks promising as more deals in the commercial and industrial (C&I) segments are anticipated alongside the continued growth of utility-scale solar projects.

Conclusion

As the clock ticks down to the bidding deadline, all eyes will be on the unfolding drama of who will come out as the victor in this high-stakes acquisition, setting a new precedent for renewable energy investments in India!