Airtel Makes its Foray into Solar Through the Group Captive Model

Acquires 26% stake in AMPSolar for $1.2 million through the group captive model

October 22, 2019


Leading telecom operator Bharti Airtel Limited has entered into an agreement with AMPSolar Evolution Private Limited (AMPSolar), a wholly-owned subsidiary of AMPSolar Technology Private Limited (AMP), to acquire equity shares and compulsorily convertible debentures (CCDs) as part of a group captive solar project deal.

As per the Bombay Stock Exchange (BSE) filing, the acquisition doesn’t fall under the purview of “related party transactions.” The acquisition is scheduled to be completed by April 2020, which is the scheduled commercial operation date.

The total cost of acquisition is ₹84 million (~$1.2 million) which includes subscription of 84,000 (26%) equity shares of ₹10 (~$0.141) each in tranches and subscription of 83,160 (26%) of CCDs of ₹1,000 (~$14.1) each.

Speaking to Mercom, a company spokesperson for AMPSolar said, “Airtel will be buying power from us in Uttar Pradesh through the group captive model. We are also in talks with other companies, and it will take some time to materialize.”

The Sunil Bharti Mittal-led firm has signed the agreement with the primary objective to meet the green energy needs and comply with the regulatory requirement.

Large corporations in India are slowly getting into renewable energy. As most states have made it extremely difficult to procure solar energy through open access by adding a slew of additional charges on consumers, group captive has become a more attractive model.

Unlike an individual captive or third-party sale power project, group captive is an arrangement through which a developer sets up a power project for the collective use of multiple industrial or commercial consumers who have 26% equity in the project and must consume 51% of the power produced. Typically, in a group captive setup, a developer will build the project under a special purpose vehicle (SPV) company and offer 26% equity to the consumer. Further, an agreement is entered into to buy back the shares on the termination of the procurement contract.

In May this year, Mercom reported that Mumbai-based pharmaceutical giant Cipla Limited signed an agreement to acquire a 26% stake on a fully diluted basis in AMPSolar Power Systems Private Limited. AMPSolar Power Systems is a wholly-owned subsidiary of AMP Solar Technology Private Limited, and the special purpose vehicle (SPV) was formed with the sole purpose of setting up a captive power plant in Maharashtra.

Previously, Mercom had reported that AMPSolar quoted the lowest tariff (L1) of ₹1.58 (~$0.022)/kWhat the auction held by the Madhya Pradesh Urja Vikas Nigam Limited (MPUVNL) for the development of 35 MW of grid-connected rooftop solar under RESCO model. The company will install rooftop solar at ten sites of Power Grid Corporation of India (PGCIL), a central government PSU, with an estimated capacity of 2.25 MW. The total capacity won by AMPSolar is 7.42 MW distributed among 27 sites. The company quoted the maximum tariff of ₹1.67 (~$0.024)/kWh for institutions of central government or of national importance.