First Solar India

IDFC Alternatives’ India Infrastructure Fund II (IIF II), through its wholly-owned subsidiary Vector Green Energy, has entered into definitive agreements with First Solar Power India and its affiliates to acquire seven operating solar projects with a total capacity of 190 MW across the Indian states of Andhra Pradesh and Telangana.

The deal value was not disclosed but reports indicate that the transaction is worth approximately $300 million (~Rs.19.3 billion).

First Solar’s India head Sujoy Ghosh said, “We are able to demonstrate the ability to recycle capital by creating a portfolio of de-risked assets that demonstrate predictable and reliable cash flows and thereby create value for sophisticated financial investors like IDFC Alternatives.”

“Consistent with its stated strategy of aggregating operating renewable assets, the IIF II is well on its way to achieving an installed base of 400-450 MW of operating renewable assets by the end of the current financial year,” IDFC Alternatives Partner Aditya Aggarwal said.

With the sale, First Solar will be divesting almost all of its operating projects in India. According to Mercom’s India Solar Project Tracker, First Solar currently has 200 MW of large-scale projects in operation in Andhra Pradesh and Telangana with another 60 MW under construction in Karnataka. The Telangana projects have a tariff between Rs.6.45-6.90 (~$0.10-0.11/kWh and the two Andhra Pradesh projects have a tariff of Rs.5.35 (~$0.08)/kWh + 3% escalation for 10 years.

Offtakers for these projects are Southern Power Distribution Company of Telangana Limited. Lenders for these projects were Axis Bank and YES Bank. EPCs for these projects were Mahindra Susten and Sterling &Wilson with inverters provided by ABB and SMA accordingly.

Hyper competition in the Indian solar auctions resulting in record-low bids has caused some companies to take a step back as returns on such projects are not attractive enough.

Speaking on a conference call regarding the Indian solar market in August 2016, First Solar CEO Mark Widmar said: “We’re seeing a lot of very aggressive pricing behavior in the market whether it’s at the PPA level or whether it’s at the module level.”

This deal complements First Solar’s strategy of pivoting from project development to manufacturing and transitioning to Series 6 module manufacturing.

According to Mercom’s Q4 and Annual 2016 Solar Funding and M&A Report, IDFC Alternatives acquired three solar projects aggregating 45 MW capacity from Punj Lloyd at an estimated enterprise value of Rs.3.5-3.75 billion (~$52.3-56 million).

Image Credit: First Solar