Under Section 31(1) of the Competition Act, 2002, the Competition Commission of
India (CCI) has authorized Adani Green Energy's acquisition of SB Energy
Holding. The proposed combination envisions Adani Green Energy acquiring the
complete (i.e., 100 percent) shares in SB Energy Holding from its current
shareholders. Adani Green Energy is in the business of generating electricity
from renewable sources. The company is a subsidiary of the Adani Group, a large
Indian conglomerate with six publicly traded enterprises.
Adani Green Energy and
its subsidiaries operate in India, generating electricity primarily by:
- solar energy,
- wind energy, and
- hybrid energy
SB Energy Holding is the ultimate holding company which is involved in the
generation, supply, and sale of electricity and renewable energy through special
purpose vehicles (SPVs) founded in India to develop renewable energy projects.
Adani Green Energy has purchased the entire stake in SB Energy.
Adani Green announced in May of this year that it had signed share purchase
agreements with SoftBank Group and Bharti Group for the purchase of a 100% stake
in SB Energy India for $3.5 billion. This deal was hailed as the country's
largest acquisition in the renewable energy sector. SB Energy India is a joint
venture between Japan's SoftBank Group Corp.
(SBG) (80%) and India's Bharti
Group (20%) that has 4,954 MW of renewable energy assets. Large-scale utility
assets with 84 percent solar capacity (4,180 MW), 9 percent wind-solar hybrid
capacity (450 MW), and 7 percent wind capacity (324 MW) make up the goal
portfolio. A total of 1,400 MW of solar generating capacity is operational, with
a further 3,554 MW under construction.
All projects have 25-year PPAs with
sovereign-rated counterparties such as Solar Energy Corporation of India Ltd. (SECI),
NTPC Limited, and NHPC Limited. The portfolio's operating assets are
predominantly solar park-based projects that have been created using
best-in-class governance, project development, construction, and operations and
maintenance procedures, resulting in one of the country's highest-quality
Four years ahead of schedule, the Adani Group has completed its goal of
constructing 25 GW of renewable energy capacity in India. The goal was met in
May of 2021. The company plans to increase its solar cell and module
manufacturing capacity to four gigawatts (GW).
The Group is also building a new
wind turbine manufacturing cluster in Mundra, Gujarat, as part of its domestic
manufacturing ecosystem for renewables. The Group's operations are in line with
not only India's climate change ambitions but also the global push for net-zero
emissions. Its ports have pledged to become carbon neutral by 2025, with zero
trash to landfill, the replacement of single-use plastic, and afforestation of
more than 5,000 hectares.
Sustainability goals drive every new firm it
incubates, whether it's a network of renewable-energy data centers, green
hydrogen exploration with partners like Snam and Tecnimont, or green hydrogen
projects. The Adani Group plans to keep investing in such technology and take
initiatives to achieve its environmental, social, and governance (ESG)
objectives. The portfolio's operating assets are predominantly solar park-based
projects that have been created using best-in-class governance, project
development, construction, and operations and maintenance procedures, resulting
in one of the country's highest-quality renewable portfolios.
"The economic appeal of solar PV, combined with fierce private-sector rivalry,
has resulted in record-low tariff bids." At the last climate meeting sponsored
by the United States, India also pledged to build 450 GW of renewable energy
power capacity by 2030. This will likely raise renewable energy's proportion of
overall power generation installed capacity to 54 percent, compared to a 36
percent share of overall gross generation."
According to Raju N, Care Ratings'
group head of infrastructure and project finance, the sector will see a lot of
consolidation, and the Adani transaction bodes well for the competition. Between
April 2000 and December 2020, India received $9.83 billion in foreign direct
investment in renewable energy. Total investment in the sector, including
domestic spending, has totaled $42 billion since 2014. Companies and private
equity firms, such as the Tata Group and Brookfield, have shown increased
interest in the sector in recent years.
The major independent power producers, ReNew Power, Greenko, Adani Green, Tata
Power, ACME, SB Energy, Azure Power, Sembcorp Green Infra, and Hero Future
Energies, are increasingly dominating the Indian renewables sector, according to
the report, and each has invested heavily in building capacity in international
debt and equity markets. However, companies like Vena Energy/Vector Green, O2
Power, Ayana Renewable Power, and Torrent Power as well as state-owned fossil
fuel companies like NTPC and NLC that are looking to decarbonize, are posing an
"Over the past two years, India's renewable infrastructure
industry has seen major mergers and acquisitions activity, a growing list of
green bond issuances, and spinning off of operating renewable assets via
infrastructure investment trusts," said Saurabh Trivedi, co-author of the
"However, to fully realize this potential, India requires more project
developers with stronger balance sheets, as well as additional opportunities for
pension investors. The local infrastructure investment trust market is
increasingly being recognized as a significant facilitator of this
domestic-foreign capital interplay, allowing the domestic Indian finance
industry to expand and diversify "he stated.
The acquisition of SB Energy by Adani Green Energy is the largest deal in
India's renewable energy sector, valued at $26,000 crores ($3.5 billion).
According to India's Ministry of Power and Ministry of New and Renewable Energy,
the country now has one of the largest renewable energy expansion initiatives,
with capacity additions of 175 GW by 2022 and 430 GW by 2030.
joined the country's well-publicized National Solar Mission in 2012, which was
followed by a revision of solar energy capacity increase to 100 GW by 2022.
These newcomers were eager to ride the wave of decarbonization, sustainability,
and government efforts to reduce reliance on fossil fuels for energy generation
while emphasizing renewable energy. Aside from the increased competition, the
sector experienced other issues such as delays in payments by distribution
utilities, regulatory delays in tariff adoption, and reverse auction bidding,
which drove bid prices to exceptionally low levels. The COVID-19 pandemic, which
began in 2020, exacerbated the financial situation of some renewable energy
Due to a substantial drop in economic activity and power
demand, distribution utilities were either postponing payments or hesitating to
sign new power purchase agreements, putting the project developer's financial
condition and capacity to complete future projects in jeopardy. As a result,
numerous renewable energy developers have sold partial stakes to raise finances,
or have completely sold off their renewable energy operational assets to deleverage their balance sheets or abandon the sector entirely (in cases where
renewable energy was a non-core business).
Despite the difficulties, investors
have continued to be interested in India's green economy. As a result, the
sector is consolidating, with the largest firms leveraging their financial clout
and available capital to expand inorganically.
The acquisition of SB Energy bodes well for Adani Green's aggressive growth
goals, both organic and inorganic. Adani Green aims to become the world's
largest solar energy renewable company by 2025, and a global renewable company
by 2030, with a renewable energy capacity of 25 GW by that time. Sterling and
Wilson (renewable projects built through two 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) have all
recently been acquired by the company to fuel their capacity expansion plans.
The acquisition of SB Energy adds 4.9 GW to Adani Green's portfolio, bringing
overall renewable energy capacity to 24.3 GW, four years ahead of schedule and
close to the anticipated 25 GW capacity. Adani Green Energy's ambition to be a
global leader in renewable energy is demonstrated by this acquisition, which
makes it one of the world's largest renewable energy platforms.
Written By: Shashwata Sahu, Advocate,
LLM, KIIT School of Law