Deal details: JSW Group plans to raise up to $500mn by selling a stake in JSW Neo Energy. As per reports, the group has appointed Standard Chartered Bank to assist with the sale, which has garnered interest from several bidders, including TPG's The Rise Fund. JSW Neo Energy currently has a ~6 GW operating portfolio and 3.2 GW under construction, expected to become operational by the end of 2024. Majority of the company’s assets are contracted under long-term PPAs with state-owned utilities. The company plans to expand its portfolio to 20 GW of generation capacity and 5 GW of storage capacity by 2030, with a capital investment of ~$1.2bn per year. In addition, JSW Neo Energy is rapidly diversifying its asset base by establishing a footprint in emerging clean energy domains such as green hydrogen, battery storage, and pumped hydro systems.
Deal rationale: Enerdatics understands that the proposed fundraising strategy will allow the company to avoid tapping the expensive debt market, which has seen the Reserve Bank of India (RBI) raise its interest rate several times in 2022 to bring it to 6.5% currently. High interest rates have substantially increased the cost of borrowing at the corporate and the asset-level, with JSW Neo reporting a 37% year-on-year increase in financing costs in Q1 2023. The increased cost of debt has spurred companies to explore alternative sources of growth capital, which is often the equity market. The recent move closely follows an announcement by JSW Neo Energy CEO, which claimed that the company is also exploring an initial public offering (IPO) to raise additional funds.
Other significant transactions: JSW Group’s fundraising strategy mirrors that of several other independent power producers (IPPs) in the country. Recently, Aditya Birla Group’s renewable division is looking to raise $400mn via the sale of a minority stake, while Adani Green is also seeking $1bn of capital through a similar move.
The above analysis is proprietary to Enerdatics’ energy analytics team, based on the current understanding of the available data. The information is subject to change and should not be taken to constitute professional advice or a recommendation.
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