Business
GIC reportedly explores options for its 50% stake in India’s Greenko, worth US$5B
Singapore’s GIC is exploring a potential sale of its 50% stake in India’s Greenko Energy, valued at approximately US$5 billion, reported Bloomberg.
Singapore’s sovereign wealth fund, GIC, is considering a possible sale of its 50% stake in India’s Greenko Energy, a move that could be valued at approximately US$5 billion.
According to sources cited by Bloomberg, the Singaporean entity has engaged financial advisers to explore options, including a full or partial divestment. Discussions are in the preliminary stages, and a final decision on the sale has yet to be made.
A potential deal would place the valuation of Greenko, a major player in India’s renewable energy sector, at about US$10 billion.
Greenko’s portfolio includes 7.5 gigawatts of installed capacity across wind, solar, and hydropower assets distributed across 15 Indian states. GIC’s involvement with Greenko has been substantial, holding a significant influence on the company’s strategic direction.
Potential buyers and market positioning
Prospective investors for GIC’s stake include other sovereign wealth funds, infrastructure-focused investment funds, and energy companies. Sources have indicated that considerations remain preliminary, and GIC could opt against proceeding with a sale.
Apart from GIC, Greenko’s other significant backers include the Abu Dhabi Investment Authority (ADIA) and Japanese financial group Orix. Greenko has been seeking opportunities to raise additional capital to support its growth trajectory, potentially through new investment rounds in the coming months.
The company, however, dismissed reports of GIC’s intended stake sale as inaccurate without providing further details.
Financial outlook and recent challenges
In March 2024, Fitch Ratings revised its outlook on Greenko Energy Holdings’ Long-Term Issuer Default Rating (IDR) from Stable to Negative, affirming the IDR at ‘BB’.
The revision reflects concerns regarding Greenko’s EBITDA net interest coverage, expected to fall below 1.5x by the end of the financial year 2025 before recovering in 2026. This shift is attributed to Greenko’s planned acquisition of a 60.08% stake in the 1,200-megawatt Teesta III hydro project in Sikkim, alongside additional capital expenditures for a new 1.5-gigawatt solar power plant.
The Teesta III acquisition involves substantial restoration efforts due to damage caused by flash floods in October 2023.
Greenko’s management anticipates funding part of the acquisition costs through shareholder equity inflows and insurance compensation for the flood damages. However, Fitch’s assessment includes a conservative 50% reduction in the estimated insurance proceeds and a projected six-month delay in restoration.
GIC’s strategic role in Greenko
GIC, which holds four seats on Greenko’s 13-member board, has been instrumental in shaping the company’s strategic direction.
The sovereign wealth fund’s involvement extends to oversight of Greenko’s investment plans, operational strategy, and risk management. GIC has contributed significantly to Greenko’s recent capital requirements, including a US$700 million investment in 2023 to support the development of Greenko’s pumped storage projects.
Beyond this, Greenko’s ambitious investment plans, such as the acquisition of the Teesta III project, are backed by shareholder commitments amounting to approximately US$1.4 billion over the period from 2024 to 2027. This figure represents around 25% of the projected investment costs and underscores the substantial equity support that GIC and other stakeholders have provided.
Market context and outlook
The potential sale of GIC’s stake in Greenko comes at a time of growing investor interest in renewable energy assets in India.
The country has been rapidly expanding its renewable energy capacity as part of its climate commitments and energy transition strategy.
Greenko, with its diverse asset base and experience in renewable energy development, represents a significant opportunity for investors seeking exposure to this sector.
However, the challenges faced by Greenko, particularly the financial strain from the Teesta III acquisition and related capital expenditures, present risks to potential investors.
The recent downgrade in its credit outlook by Fitch Ratings reflects these pressures, even as Greenko continues to explore opportunities to secure additional funding to support its growth.
A spokesperson for GIC declined to comment on the potential sale, while Greenko refuted reports regarding the matter without elaboration.
