Infrastructure major Larsen & Toubro (L&T) sold its 99-megawatt (Mw) hydro power project to ReNew Power, marking its entry in the hydro sector.
Separately, ReNew, which is set to list on the New York Stock Exchange, also acquired 260 Mw/330Mwp of operating solar project in Telangana. It pegged the combined enterprise value of the two acquisitions, including L&T’s project, at Rs 2,850 crore ($384 million).
As part of the deal with L&T, ReNew will take over L&T Uttaranchal Hydropower, which owns the Singoli-Bhatwari Hydroelectric Project (SBHEP), from L&T Power Development, a wholly-owned subsidiary of the company. ReNew will also absorb the project operations team of SBHEP. The sale consideration is Rs 985 crore, said a statement by L&T, and the transaction is expected to be closed before September 30. L&T company said, this is in line with the L&T’s focus of divesting non-core assets and improving shareholder value.
“This development is a significant step in our effort to unlock the value of some of our power development assets to streamline and allocate capital to create long-term value for our shareholders,” said D K Sen, whole-time director of L&T, adding that they are aiming to become a more asset-light organisation.
As the project is operational, there would be no construction cost for ReNew. Additionally, it was commissioned after March 2019, the power purchase from this project can be used to avail Hydropower Purchase Obligation (HPO) by the procurers. HPO requires states/discoms to meet a certain portion of their energy demand from hydro power.
ReNew Power said the addition of SBHEP, which has a pondage capacity of 2-3 hours, adds 200–300 Mw of low-cost hydro storage to ReNew’s portfolio. Last year, ReNew won the country’s first round-the-clock renewable project, which will have a hybrid capacity, including 0.9 Gw wind power, 0.4 Gw solar power, along with corresponding energy storage with an investment of Rs 9,000 crore.
Sumant Sinha, ReNew Power’s CEO, said the firm will acquire more hydro assets as they offer the best clean balancing sources for intermittent renewable energy. Hydro power and gas-based power projects are used for balancing purposes due to their quick start-up time. While coal is used as base power, renewable energy sources like solar and wind power are intermittent. Hydro is used to iron out the intermittency of solar and wind.
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