New Delhi
No one knows why Malaysian energy giant Petronas’s plans to invest in India’s blue-chip companies are proving to be a dampener, forcing India’s experts to say the multinational could be suffering from the proverbial one step forward two step backward syndrome. India’s state-owned largest power producer, National Thermal Power Corporation (NTPC) was all set to divest 25 percent of its green energy to Petronas, but the deal fell through because the Malaysian MNC wanted a larger stake and a position on the board of directors.
Interestingly, it was the first deal of its kind by a state-run firm. And this has happened with the Malaysian giant and two top Indian companies, besides NTPC. India’s energy officials are, justifiably, worried. They are wondering if Petronas is genuinely interested in top Indian companies.
On the NTPC issue, Bloomberg News was quoted saying Petronas withdrew its offer saying a 20 percent stake was “too small”. Petronas had outbid Indian firms REC and Indraprastha Gas (IGL) with its $460-million offer for a 20% stake in NGEL last year. But withdrew after NTPC began negotiations for a better offer, the official said.
The country’s largest power producer, which is focusing big on the green energy business, changed its strategy on funding NGEL, as it did not find the Petronas offer much attractive. Now, NTPC will raise cash through a public offering this year. On paper, Petronas had offered $460 million for a 20% stake in NTPC Green Energy, outbidding local Indian firms with an offer of Rs 27.52 rupees ($0.3362) per share. But the deal did not work because NTPC had been seeking an even higher valuation, claim those in the know.
NTPC Green Energy (NGEL) will hit the market with an initial public offering (IPO) in the current fiscal with a plan to divest 25% of its stake. The stake sale to the public would be through the book building route.
The state-run power company had late last fiscal got the Centre’s approval to induct a strategic investor in NGEL. Besides, the government’s approval for NTPC making an investment beyond a prescribed limit in NGEL came late last fiscal on 17 March 2023 on the ground that it aims to achieve a target of 60 GW renewable energy capacity. Energy officials said NTPC will require a lot of equity to grow to 60 GW of renewable energy capacity. The market for renewables is opening up and growing fast and NGEL’s public offering may give much a better valuation.
NTPC has already transferred 15 of its renewable energy assets of 2,861MW to NGEL to consolidate its renewable energy portfolio. NGEL, along with its subsidiary NREL, aims to be the flag bearer of NTPC’s renewable energy journey with presence in green hydrogen, solar and wind.
The Petronas saga has rattled India’s renewables sector which is attracting increasing foreign investment and was among the country’s top five industries for overseas funds last fiscal year, taking a 5% share of all inflows from April to September 2022, against 3.3% in the same period a year earlier.
In line with its commitment in COP 26, New Delhi is working towards a low-carbon emission path while meeting its development goals. It is aiming to reach 500 GW of non-fossil energy capacity by 2030, which is part of the country’s larger aim of moving towards ‘net zero’ emissions by 2070.
Power secretary Alok Kumar had said that the country needs to more than double its renewable energy production to achieve its goal of 90% of its energy coming from renewable sources by 2047. Currently, coal accounts for 70% of India’s electricity output. NTPC aims to add 60GW renewable energy capacity by 2032, or half of its total capacity then, target for which is set at 130GW.
This is not all. Consider the case of Petronas and its negotiations with Tata Power. The Malaysian giant wanted to become a key investor in Tata Power’s planned renewable energy infrastructure investment trust (InvIT) as India’s leading utility looked to unlock value and pare debt.
But after year-long negotiations, the Tatas terminated their near $2- billion investment deal with Petronas and its possible investment in InvIT. What is surprising is that Petronas pulled back from the deal when both sides were in the final stages. And the Indian conglomerate—much like NTPC—had gone back to the drawing board to explore an IPO for the business to capitalise on the frenzied interest of investors for green energy companies around the world, across public and private markets.
Again, Petronas is in competition with BP (British Petroleum) to invest $1.5-2 billion for a significant minority stake in a new platform wholly owned by the two founders of Greenko, Anil Chalamalasetty and Mahesh Kolli. Discussions with both parties have progressed, and Greenko is expected to choose one of the two energy majors for the time being and it is stated that this will be India’s largest offshore investment in a green ammonia and hydrogen project to date.
But see what is happening. BP has denied any development on the respected investment. Worse, BP – it is reliably learnt – is under pressure from two of the UK’s largest pension funds, which oversee £130-billion assets.
After committing to a net-zero carbon emissions target by 2050, BP walked back on its pledge to cut oil and gas output by 2030. So, what has happened? Greenco has already signed offtake agreements with Posco of South Korea, Uniper SE of Germany, and state-owned ONGC for green molecules from 2025. It has also signed an agreement with Keppel Infrastructure Holdings Pte of Singapore to explore building a factory together.
With Belgium-based John Cockerill, the new platform plans to set up a factory to make electrolysers that split water into hydrogen and oxygen.
The Greenko founders, claim sources, may also rope in some of the existing financial investors along with new ones for the venture. The strategic partner may also double down on its stake in the future. So where is Petronas? The Malaysian giant has repeatedly said India is an important growth market and the company is exploring opportunities in clean energy solutions particularly in renewables, hydrogen and green mobility.
Petronas acquired Amplus Energy Solutions Pvt. Ltd, one of India’s largest rooftop solar power producers, in 2019 from New York-based I Squared Capital for Rs 2,700 crore and has been looking to double down in one of the most promising emerging green economies to diversify its portfolio.
But there seems to be a serious roadblock. Why? No one has an answer as to why such a win-win partnership seems to be heading nowhere, despite the friendship between Malaysia and India, especially now that Anwar Ibrahim is the Prime Minister of that important member of ASEAN.