Construction giant Larsen & Toubro sait it has sold its 3 x 33 MW hydroelectric power plant in Uttaranchal to Renew Power Private Ltd for Rs 985 cr.
It said the move is aimed at allowing the company to become a more asset light organization and improve 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, Larsen & Toubro.
“It represents our strategic effort to increase focus on our core strengths and exit others to move towards becoming a more asset-light organization.”
L&T is India’s largest construction company. However, it also owns considerable assets in the infrastructure field, such as highway concessions, bridges and so on.
Even though L&T has been one of the best performing companies in India, a slowing economy has squeezed financials in all sectors, including construction.
Two weeks ago, the construction company reported a 40% sequential fall in revenue and a 64% decline in profit due to COVID-19.
Renew Power is considered a ‘unicorn’ firm, started in 2011 by Sumant Sinha, son of ex-BJP leader and former finance minister Yashwant Sinha.
The company is today one of India’s leading renewable energy power producers in terms of total energy generation capacity.
Staring with a 25.2 MW wind project in Jasdan, Gujarat, the company has grown exponentially, and has a current renewable asset base of nearly 10,000 MW, including projects under development and in the pipeline.
In October 2019, ReNew Power became the 1st RE company in India and 11th globally to cross 5 GW of installed capacity.
The Goldman Sachs-backed company claims to have contributed nearly 1% of the total electricity generated in India in FY20, and helped mitigate 0.5% of the carbon emitted in a year.
Sumant Sinha said the new asset purchased from L&T is value accretive to the company.
“Given that the asset is already operational, the acquisition is not only value accretive for us but also presents a lower level of risk. It strengthens our ability to provide firm and round the clock power to the grid and compliments our solar and wind assets, filling up an important position in our portfolio.
“We will be looking to acquire more hydro assets in future as they are the best clean balancing sources for intermittent renewable energy,” he added.
The transaction is expected to close by next month-end.