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    Statkraft to put Continuum buyout plans on hold

    Synopsis

    The talks with Statkraft began towards the end of 2019 and were in progress.

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    KPMG and global investment bank Moelis were running deal mandates.
    Mumbai: The buyout discussion between Norway’s state-owned renewable energy major Statkraft and India-focused Continuum Wind Energy is on the verge of collapse. Statkraft has decided to put their talks to acquire Morgan Stanley Infrastructure Partners-owned Continuum on hold, citing revenue fall and expected impact of prolonged lockdown, said multiple people aware of the development.

    In 2012, Morgan Stanley had invested $212 million in Continuum Wind, a clean energy company founded in 2009 by Arvind Bansal and Vikash Saraf. Continuum has a current portfolio of about 2 GW, out of which 552 MW are already operational and 628 MW are in construction. Continuum's current projects are located in Gujarat, Maharashtra, Madhya Pradesh and Tamil Nadu.

    The talks with Statkraft began towards the end of 2019 and were in progress. However, the lockdown and the uncertainty over the revenue from existng PPAs hampered the talks, said one of the persons cited above. Statkraft, which entered India in 2004, had acquired 100 MW Tidong hydropower project in Himachal Pradesh in 2018.

    Arvind Bansal, founder & CEO of Continuum Wind Energy, and a Statkraft spokesperson declined to comment while mails sent to Morgan Stanley did not elicit any response till press time.

    KPMG and global investment bank Moelis were running the deal mandates.

    Since 2015, Morgan Stanley Infrastructure Partners has been trying to sell Continuum and engaged in discussions with various potential buyers such as SunEdison and Canada's Brookfield, while the talks never materialised.

    In June 2015, SunEdison Inc had signed a definitive agreement to acquire Continuum with assets in India while the company decided to terminate the agreement in November 2015. Later, founder Arvind Bansal had sought the backing of PE funds to acquire stake from Morgan Stanley, which also did not fructify. Talks with Canadian funds including Brookfield Asset Management also didn’t succeed.

    "The wind power sector is facing significant challenges because of the delays in making payments by the state distribution utilities and the execution delays being faced by the projects bid out by the central nodal agencies and state distribution utilities," said a recent report from ICRA. This apart, the tariff uncertainty for the wind power projects in Andhra Pradesh has affected investor sentiments in the sector. This is also reflected in the slowdown in the tendering activity of wind power projects by 67% to 2.3 GW in CY2019 from 6.9 GW in CY2018.

    Many of the bids called by central nodal agencies remained under-subscribed. While the capacity addition is likely to improve on a fiscal year basis to about 2.5 GW in FY20 from 1.6 GW in FY19 on the back of large project backlog, achieving the 60 GW target set by the government of India by December 2022 remains a challenge, the report added.

    "The Covid-19 pandemic and the consequent lockdowns have affected the ability of companies and investors to complete or execute on M&A deals that were in the pipeline," said a partner with a leading Mumbai-based law firm. Medium term cash flow impact in many sectors is still not clear and consequently buyers will try and renegotiate entry valuations based on this uncertainty. We are seeing many more deals with convertibles and deferred consideration to bridge this valuation gap, he added.

    Since lockdown started in India, several infrastructure deals in roads and energy sectors have been either deferred or called off, citing the expected fall in revenue generation.

    Leading Canadian fund CDPQ has also deferred its plan to purchase Highway Concessions One (HC1), a portfolio of seven toll roads from Global Infrastructure Partners (GIP), it is learnt. Similarly, National Infrastructure and Investment Fund (NIIF) is engaged in renegotiations with Essel Infraprojects to acquire its two roads, where the talks were in final stages.



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    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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