Shell’s Green Play: Interest in Sprng Energy’s assets grows, with ArcelorMittal and CPPIB among candidates

A high-stakes sale is underway in India’s burgeoning renewable energy sector, as Shell Plc is exploring the sale of 1 gigawatt (GW) of operating assets from its Sprng Energy unit. The energy giant is seeing interest from global and domestic players, including ArcelorMittal, Singapore’s Sembcorp Industries Ltd, the Canada Pension Plan Investment Board (CPPIB) and JSW Neo Energy, according to two people familiar with the matter.

The sale is being handled by HSBC, the people mentioned above said. The equity and enterprise value are $350 million and $1.1 billion, respectively.

Shell acquired Sprng Energy from Actis LLP in 2022 for $1.55 billion. At the time, Sprng Energy had 2.1 GW of operational renewable energy projects and 7.5 GW in the pipeline, and has since added 800 megawatts (MW) more. Notably, CPPIB, Sembcorp, and ArcelorMittal conducted due diligence on Sprng Energy during the Shell-Actis transaction.

Mint announced that Shell Plc is considering selling a stake in the operating assets of Spring Energy Group and has instructed Ambit Group to conduct a valuation.

Shell Energy Recalibration

In June last year, Shell unveiled a “sustainable energy transition” strategy under CEO Wael Sawan, focusing on maintaining its leading position in the global liquefied natural gas (LNG) market while “stabilizing liquids production by 2030.”

In an emailed response, a Shell Group spokesman said: “We have no further comment beyond what we have previously provided.”

“As outlined at Capital Markets Day in June 2023, we are working to grow our renewables portfolio as part of an integrated energy business in the key market of India. To be clear, there is no strategic review of Sprng Energy. We continue to develop new projects within Sprng,” the spokesperson said. “In line with our Capital Markets Day guidance, we are exploring opportunities with investors looking to invest capital in risk-adjusted operating assets. This focus on capital discipline will enable Shell to further accelerate the growth of our renewables portfolio.”

Spokespeople for HSBC and CPPIB declined to comment.

Other major Indian green energy companies, including ReNew Energy Global Plc, have also adopted a capital recycling strategy, selling operational clean energy capacity and reinvesting it in new projects.

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Inquiries addressed to representatives of ArcelorMittal, Sembcorp, JSW Group and Ambit Group remained unanswered.

The main candidates and their green strategies

ArcelorMittal’s interest in the deal is in line with its strategy to reduce its carbon footprint in response to the European Union’s Border Adjustment Mechanism (CBAM), which will tax “embedded carbon” in imports of high-emission goods such as steel and aluminum. ArcelorMittal has already announced a $600 million investment in a 975-MW renewable energy project in Andhra Pradesh through a partnership with Greenko Group.

Meanwhile, JSW Neo Energy is actively involved in the Indian clean energy market. The company acquired 1.75 GW of renewable energy projects from Mytrah Energy for an enterprise value of Rs. ₹10,530 crore and is among the companies that have signed non-disclosure agreements to acquire O2 Power, a renewable energy platform in India, in a deal with an equity value of around $1 billion. JSW Neo Energy has also made a non-binding offer for a significant majority stake in Ayana Renewable Power Pvt. Ltd, which could lead to a full acquisition at an equity valuation of around $800 million. The company’s total generation portfolio stands at 13.6 GW, with 2.6 GW under construction.

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Singapore-listed Sembcorp is also pursuing an aggressive green energy strategy in India. The company is one of the bidders for Brookfield Renewable’s 1.6 GW portfolio in India, which could be valued at about $800 million. Sembcorp is also in talks with NASDAQ-listed ReNew Energy Global Plc to acquire 350 MW of solar projects.

CPPIB, known for its patient capital approach, is an investor in ReNew Energy Global Plc and has shown interest in other clean energy assets. The Canadian pension fund is also one of the final bidders for Athaang Infrastructure (NIIF) National Investment and Infrastructure Fund, a road platform with an equity value of about ₹4000 crores.

Shell, which employs about 10,000 people in India, operates an LNG terminal in Hazira on the country’s western coast and has 350 fuel stations in eight states. The company launched an electric vehicle (EV) charging service, Shell Recharge, in 2022. Through its New Energies unit, established in 2016, Shell has invested in Indian new energy companies such as Husk Power, d.light, Orb Energy and Cleantech Solar, as part of its goal to become a profitable energy company with net-zero emissions by 2050.

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India’s renewable energy capacity stands at 180.79 GW, of which 73.31 GW comes from solar and 44.73 GW from wind. The government aims to add 50 GW of renewable energy capacity per year to reach 500 GW by 2030, which will drive significant deal activity in the sector, it said earlier. Mint.