Essel has a total portfolio of 23 projects, under various stages of development, with nearly 310 MW of operational solar power facilities, and another 375 MW capacity under construction.
UK-based private equity firm Actis LLP has reportedly agreed to buy solar power projects of Essel Infraprojects for Rs 5,500-6,000 crore, Mint reported.
The deal may be formally announced by December-end, the report said.
Earlier this year, Essel Infra, part of media mogul Subhash Chandra’s Essel Group, had put its solar assets on sale and since then it has been negotiating with potential buyers.
Essel has a total portfolio of 23 projects, under various stages of development, with nearly 310 MW of operational solar power facilities, which it had bid for under the National Solar Mission and state government auctions, and another 375 MW capacity under construction.
India's renewable energy industry is witnessing a wave of consolidation as smaller companies exit the industry due to low tariffs, stiff competition and drying access to cheap funds. In 2017, solar tariffs hit the lowest level of Rs 2.44 per unit from Rs 10.95-12.76 per kWh in 2010-11.
"In order to compete in solar and wind business, one needs to have access to low-cost funds," Crisil Research Director Rahul Prithiani told the paper, adding investors look at operating assets where cash flows are more certain so that they can deploy relatively low-cost funding and ensure good returns.
Media reports suggested Tata Power, Actis, Greenko and Hero Future Energies were in talks with Essel Infra to acquire its solar power plants.
"Essel Infra has comparatively older assets, which were won when prevailing solar tariffs were higher," a person aware of the development told the paper. He added that Essel's assets have power purchase agreements (PPAs) with state governments for as high as Rs 8 per kilowatt hour (kWh) while the average PPA for the assets is at Rs 5.50 per kWh.
Investors may be willing to pay a premium for these projects as the assets have PPAs with higher tariffs. "Developers and investors take an inordinate risk when investing in renewable projects because the technology in modules and solar panels becomes outdated very quickly. So, higher PPAs give us some comfort when making investments," an investment banker said.
In October, Edelweiss Infrastructure fund- backed Sekura Energy signed an agreement to acquire two operating and two under-construction power transmission assets from Essel Infraprojects, for an enterprise valuation of Rs 6,000 crore.Essel Infra wants to expand its footprint in green energy across emerging sectors such as water, railways and municipal solid waste. In the long run, the group expects the asset sales in the renewable energy and transmission business to fund the growth of its new businesses, the report said.