EQT-Temasek Plans to Offload Sustainable Venture O2 Power

4 Mar 2024 , 11:54 AM

According to persons familiar with the situation, global investment heavyweights EQT Capital and Temasek have decided to sell renewable energy platform O2 Power in order to recoup their five-year investment.

Barclays has been appointed to start the formal selling procedure. Approaches will be made to international infrastructure funds and energy businesses. This comes as about a dozen transactions involving renewable assets in India are in various phases of execution. Those engaged include the Aditya Birla Group, Brookfield, and Macquarie Infrastructure, among others.

In 2019, Swedish-based EQT Infrastructure Partners partnered with Temasek and former Renew Power executives to launch O2 Power. EQT Infrastructure’s parent, EQT Capital, later purchased Baring Private Equity Asia, forming one of the world’s leading alternative asset managers across private equity, credit, and infrastructure. Former Renew Power executives were COO Parag Sharma and VP of Strategy Peeyush Mohit.

Sponsors EQT and Temasek invested $500 million in seed equity financing for 51% and 49%, respectively. The top management and founding team have various economic incentive structures.

Currently, O2 Power has 1.8 GW of operating solar, wind, and commercial and industrial (C&I) plants, which will be increased to 2 GW by March 2024. Over the next fiscal year, another 1.5 GW of capacity is scheduled to be installed, with the goal of reaching 5GW by FY26.

The business has already secured PPAs for 3 GW. According to sources, it is one of three companies that will build 1 GW of greenfield capacity by 2023, alongside Adani Green and Renew Power.

Only $400 million of the $500 million promised has been drawn yet. According to one of the persons quoted above, the two sponsors have pledged an additional $500 million in growth equity.

O2’s two sponsors foresee an equity valuation of $1-1.2 billion, which includes both secondary and primary capital injection. The platform’s debt is presently between $700 and $800 million. Upon completion of 4 GW, the figure is estimated to triple to little more than $2 billion. With the complete 4 GW rollout plan in mind, the contract size might be about $2.5-3 billion in enterprise value.

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