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JP Morgan in talks to sell stake in Leap Green Energy for $200 million

According to reports, JP Morgan Asset Management Holdings Inc., the investment arm of JPMorgan Chase and Co., plans to sell half its stake in Chennai-based wind power company Leap Green Energy Pvt. Ltd, two people familiar with the transaction said.

The deal could be in range of $200-225 million, they said, requesting anonymity.

JP Morgan holds about a 75% stake in Leap Green Energy, acquired in tranches since 2010.

Leap Green Energy, founded in 2006, is promoted by former Formula 1 driver Narain Karthikeyan’s family.

Emails sent to Rajeev Karthikeyan, managing director of Leap Green Energy, on Tuesday and a JP Morgan spokesperson last month were not answered.

The deal will be signed at an enterprise valuation of $550-600 million, one of the persons said.

JP Morgan has a total investment of about $100 million in Leap Green Energy, according to the second person cited above. The fund invested $36 million each in two tranches and subsequently participated in the acquisition of some wind power assets acquired by Leap Green Energy.

In 2013, Violet Green Power Pvt. Ltd, a subsidiary of Leap Green Energy, acquired wind turbines with a 33 megawatt (MW) capacity located in Rajasthan from DLF Home Developers for Rs.67.44 crore ($10.9 million).

DLF also sold its Tamil Nadu windmill undertaking of 34.5MW capacity to Tulip Renewable Powertech Pvt. Ltd, a Coimbatore-based subsidiary of Leap Green Energy, for Rs.188 crore.

JP Morgan now wants to exit a part of its investment and has started initial discussions with a few foreign renewable energy producers and private equity funds, said the second person.

Avista Advisory Group and Macquarie Capital are advising JP Morgan on the deal.

Leap Green Energy has an operating income of about $60 million. The deal may be closed at a valuation close to 10 times that, said the second person.

Acquisition of Indian assets by global renewable energy producers has picked up in 2015 following the government’s attempts to push for greater clean energy production in the country.

The government has set a target of 175,000MW in clean energy by 2022. This will comprise 100,000MW in solar power, 60,000MW in wind power, 10,000MW in energy from biomass and 5,000MW from small hydroelectric projects. Currently, India’s clean energy capacity is 33,000MW.

The increased focus on clean energy has evoked interest from strategic investors and is allowing existing investors to secure profitable exits.

In June, Morgan Stanley Infrastructure, an infrastructure-focused private equity fund, sold Continuum Wind Energy Ltd to SunEdison Inc., the world’s largest renewable energy development company.

In February, infrastructure-focused private equity fund IDFC Private Equity Fund II and IDFC Private Equity Fund III, which were majority shareholders in Green Infra, sold their stake to Singapore-based Sembcorp Utilities Pte Ltd for $169 million.

Three private equity investors, New Silk Route Partners Llc, Argonaut Private Equity and Bessemer Venture Partners, who jointly hold about 80% stake in Mumbai-based solar power producer Kiran Energy Solar Power Pvt. Ltd, are also in discussions to sell their stake, CNBC-TV18 reported on 22 June.

“The deals are largely tactical so far, with early investors making an exit and others acquiring to build a ready portfolio of operating assets. The more dominant play is in greenfield solar bids which are attracting larger ticket sizes of 100-150MW each and at increasingly attractive tariffs,” said Kameswara Rao, partner and leader, energy, utilities and mining at PricewaterhouseCoopers Pvt. Ltd, a consultancy firm.

Several prominent private equity investors have investments in the renewable energy sector in India.

In 2011, Goldman Sachs Group Inc. acquired a controlling stake in ReNew Power Pvt. Ltd, with an equity investment of up to Rs.1,000 crore.

Government of Singapore Investment Corp. Pte Ltd and US-based EIG Global Energy Partners Llc are invested in Greenko Group Plc, a company listed on the London Stock Exchange’s Alternative Investment Market.

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