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GAIL in discussions to buy stake in ACME Solar

The company is carrying out due diligence on solar power plants owned by ACME Solar

GAIL (India), Solar power generator, ACME Solar, Solar power plants, Special Purpose Vehicles, Renewable energy space, Volatility in natural gas prices, Crude oil, Bharat Heavy Electricals, BHEL, State electricity boards, Power purchase arrangements

GAIL (India) has entered exclusive talks to buy a stake in privately-owned solar power generator ACME Solar.

The company is carrying out due diligence on solar power plants owned by ACME Solar.

It is yet to discuss financial terms with ACME Solar’s shareholders. The discussions are at an early stage. The proposal has not been taken up by the GAIL (India) board.

The company could pick up anywhere between 49-74% stake in ACME Solar if discussions progress towards a deal.

The talks are open-ended. The deal could involve an investment in the parent company and also separate investments in certain special purpose vehicles (SPVs) that house individual projects.

The company is exploring investments in the renewable energy space as part of a strategy for diversification of its businesses and create a hedge against volatility in natural gas prices which are linked to crude oil.

ACME Solar’s portfolio of 5.8 GW places it amongst the largest standalone solar power generation companies in the country and could be worth over $1.6 billion.

GAIL (India) has a tie-up with state-owned Bharat Heavy Electricals (BHEL) for setting up renewable energy projects and also providing financial support to start-ups who are setting up businesses related to clean energy.

ACME Solar has a pan-India portfolio of solar power generation plants covering 12 Indian states. Its operational plants produce nearly three GW solar energy which is supplied to state electricity boards with whom it has long-term power purchase arrangements (PPAs) some of which extend up to 25 years.

The company is also in the middle of setting up new solar plants that have capacity to generate a further 2.8 GW power. It generated free cash flows of Rs 800 crore in FY20 leaving it with ample liquidity after accounting for its capital expenditure.

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