Companies
Fortum to sell majority stakes in renewable, EV charging businesses in India
Summary
- Fortum Oyj has appointed EY and Opus Corporate Finance LLPis set to divest its majority stakes in its Indian renewable energy and EV charging network businesses, respectively.
- This aligns with its focus on consolidating its core Nordic markets following significant losses due to the Ukraine war
Finnish state-run energy giant Fortum Oyj has engaged EY and London-based Opus Corporate Finance LLP to oversee the sale of majority stakes in its Indian renewable energy platform and electric vehicle (EV) charging network, respectively.
Known respectively as Fortum India Pvt. Ltd (FIPL) and GLIDA, the two assets are part of Fortum's strategic shift to focus on its core Nordic markets amid geopolitical challenges. The deals have an equity value of approximately $300 million (around ₹2,700 crore), according to two individuals familiar with the development.
Divesting FIPL stake
The first transaction, termed “Project Samsara", involves Fortum divesting its majority stake in FIPL, the management company responsible for spearheading the utility's renewable energy initiatives in India, and a $300 million investment for future projects. FIPL is currently developing a 200 megawatts (MW) commercial and industrial (C&I) solar-wind hybrid project, with an additional 600 MW of ready-to-build projects in the pipeline.
The second transaction, dubbed "Butterfly," focuses on GLIDA, formerly known as Fortum Charge & Drive India. This entity operates around 850 EV charging points across India.
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This divestment strategy coincides with AM Green's plans to acquire Fortum Oyj's and Chempolis Oy's 50% stake in their joint venture, Assam Bio Refinery Pvt Ltd, along with the Finnish biotechnology firm Chempolis Oy, as previously reported by Mint. The move signals Fortum's broader strategy to streamline its operations and focus on core markets.
“Fortum is seeking an investor in its Indian renewable energy business in a mix of secondary sale and primary infusion. It is also looking to sell stake in its EV charging business," said one of the two people cited above requesting anonymity.
Geopolitical challenges and strategic refocus
The proposed sales come in the wake of the war in Ukraine, which led to disruptions in gas supply and significant losses for Fortum's majority-owned subsidiary, Uniper, which was subsequently sold to the German government at a loss of around €6 billion. Additionally, the Russian Federation seized Fortum's Russian assets, valued at approximately €5 billion. These events have forced Fortum, the third-largest Nordic utility, to refocus its strategy, concentrating on its core Nordic market and reducing its presence in other regions, including India.
The Ukraine war has also impacted India's energy sector, with Russian state-owned Gazprom failing to fulfil a contract to supply liquefied natural gas (LNG) to state-run GAIL (India) Ltd.
“Fortum has initiated arbitration proceedings against the Russian Federation and will claim compensation for the unlawful seizure of its assets in order to protect its legal position and shareholder interests. The commencement of arbitration proceedings follows the Russian Federation’s violations of its investment treaty obligations under the Bilateral Investment Treaties that Russia has with the Netherlands and Sweden," Fortum had said in a statement on 27 February.
As part of its capital recycling strategy, Fortum India has already sold projects totalling 1.1 gigawatts (GW). These include 700 MW to Actis LLP, 230 MW to UK Climate Investments and Elite Alfred Berg, and 185 MW to Malaysia’s state-run oil and gas company Petronas’ unit Gentari. Earlier this month, Fortum announced the sale of its recycling and waste business to Summa Equity through its portfolio company NG Group in a €800 million deal.
Fortum India president Sanjay Aggarwal declined to comment on the developments. An EY spokesperson also refrained from commenting, while a Fortum Corp spokesperson, in an emailed response, said, “As a stock listed company, we do not comment on any market rumours or speculations."
Projects in different stages
“After the announced divestment of the 185-MW Indian solar portfolio, Fortum still has EV charging services and a renewables development portfolio with projects at different stages in India. In line with its Nordic strategy, Fortum is limiting its exposure in India and evaluating alternatives for these remaining operations and will not make any further commitments in India. The remaining net assets including guarantees amount to approximately €30 million," the spokesperson elaborated.
The spokesperson also noted that Fortum is exploring strategic options for its circular solutions businesses, including potential divestments, but emphasized that there is no certainty of any transactions occurring. “Fortum will inform the market, if and when appropriate."
Queries sent to the spokesperson of Opus Corporate Finance on Saturday evening went unanswered.
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India's C&I segment is witnessing strong investor interest due to favourable regulatory conditions that allow large power consumers to source energy from the open market. This regulatory support has made C&I projects less susceptible to risks such as power procurement curtailment by state-run power distribution firms, bolstered by the implementation of Time of Day (ToD) tariffs by State Electricity Regulatory Commissions (SERCs) for large C&I consumers.
