BP Sells Indian Wind Assets to Green Infra for Greater Focus on U.S. Wind Sector

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Researched by Industrial Info Resources (Sugar Land, Texas)--BP plc (NYSE:BP) (London, England) has divested the company's wind power assets in India with the sale of BP Energy India Private Limited (BPEIPL) to independent power producer Green Infra Limited for $95 million. The equity component of the sale amounts to $37 million, while the debt component amounts to $58 million.

The transaction was a result of a strategic decision taken by BP to focus on offshore wind development projects in the United States, where its wind energy portfolio consists of nearly 100 projects with a combined potential power-generating capacity of more than 20,000 megawatts (MW).

With the acquisition of BPEIPL's assets, comprising three wind power plants with a total capacity of 100 MW, Green Infra is the largest independent power producer in India's renewable energy sector with a total capacity of 124 MW. BPEIPL owns and operates a windfarm in Maharashtra and two wind power projects in Karnataka. The 40-MW windfarm in Dhule, Maharashtra, commenced operations in the second half of 2007. The 36.3-MW wind power plant in Bharmasagara, Karnataka, was commissioned in the last quarter of 2008, while the 23.1-MW windfarm in Telagi, also in Karnataka, was commissioned in the first quarter of this year. Green Infra operates a 25-MW windfarm in the southern Indian state of Tamil Nadu.

Green Infra is a joint venture between IDFC Private Equity (IDFC PE) (Mumbai), a wholly owned subsidiary of Infrastructure Development Finance Company Limited (BSE:532659) (IDFC) (Chennai, Tamil Nadu) that is India's largest private equity fund focused on the infrastructure sector, and Emergent Ventures India (Gurgaon, Haryana), which provides advisory services in Clean Development Mechanism (CDM). Green Infra has 100% equity support from IDFC PE, which has committed funds of about $75 million, of which more than $41 million already has been disbursed to the independent power producer and includes the equity component entailed in the recent transaction with BP.

The acquisition of BPEIPL is in line with Green Infra's plans to invest $623 million in 500 MW of renewable power-generation projects across the country by the end of the 11th five-year plan period, 2007-12. According to plans announced by the firm in April, about 300 MW of the proposed capacity would be generated from wind power plants, 100 MW from small-sized solar power projects, and the remainder from small-sized, gas-based and biomass power plants. The overall cost of developing the proposed renewable-power projects is estimated at $1.25 million per MW of installed capacity.

Green Infra operates assets worth more than $155 million, including a project development pipeline of more than 300 MW, as well as 20 MW of assets eligible for generation-based incentives awarded by the Indian government. The firm plans to pursue organic as well as inorganic growth through further acquisitions. IDFC PE estimates that only 7.5% of India's estimated potential in generation of renewable energy has been harnessed so far. The firm also intends to focus on the development of onshore windfarms, which are less expensive than offshore wind power projects.

According to a recent publication titled "Indian Wind Energy Outlook 2009," released jointly by Global Wind Energy Council (Brussels, Belgium) and Indian Wind Turbine Manufacturers Association (Chennai, Tamil Nadu), wind power is expected to address up to 24% of India's power requirements and generate 213,000 green-collar employment opportunities by the year 2030. The sector is expected to attract annual investments of about $9.86 billion during this period.

BP clarified that the sale of its wind assets in India would have no impact on other businesses conducted by the firm in the region. The firm holds a 71% stake in leading automotive lubricant producer Castrol India Limited (BSE:500870) (Mumbai). BP owns a coal-bed methane block in Birbhum, West Bengal, and a deepwater-gas exploration block in the Krishna-Godavari basin. The firm also has been operating Tata BP Solar India Limited (New Delhi) as a joint venture between BP Solar International Incorporated (Frederick, Maryland) and Tata Group (Mumbai) since 1989. The venture manufactures solar cells, photovoltaic modules and solar thermal systems, and exports about 60% of its products primarily to Europe.

In the U.S., BP has interests in six windfarms with a total installed capacity of more than 1,000 MW, and an additional 1,000 MW of wind power projects that are in advanced stages of development. The firm operates the Fowler Ridge I project in Indiana, with a capacity of 400 MW; the Cedar Creek windfarm in Colorado, with a capacity of 300.5 MW; the Sherbino I project in Texas, with a capacity of 150 MW; the Flat Ridge I windfarm in Kansas, with a capacity of 100 MW; the Silver Star I windfarm in Texas, with a capacity of 60 MW; and the Edom Hill wind power project in California, with a capacity of 20 MW.

(there are no exact PEC matches with US windfarms above. There are PECS for new BP projects and expansions)

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