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Reliance Industries’ solar deals move India closer to renewables target

12 October 2021 Max Tingyao Lin

Reliance Industries, the largest publicly traded company in India by market capitalization, advanced its promised megascale green investment program by announcing back-to-back acquisitions in the solar sector.

The Mumbai-listed conglomerate said 10 October that its wholly owned subsidiary Reliance New Energy Solar (RNES) agreed to buy Norway-headquartered solar panel maker REC Group from China National Bluestar for an enterprise value of $771 million.

Separately, the same subsidiary is buying 40% of Sterling and Wilson Solar, an India-based provider of engineering, procurement, and construction (EPC) as well as operations and maintenance services, via a mixture of private issuance, secondary purchases, and a public offer for as much as Rs 36.3 billion ($481 million) of stock.

"Reliance is now ready to set up a global scale integrated photovoltaic (PV) giga-factory and make India a manufacturing hub for lowest-cost and highest-efficiency solar panels," Reliance Industries Chairman Mukesh Ambani said in a statement.

The integrated plant in Jamnagar is expected to have an initial capacity of 4 GW of PV panels per annum before eventually ramping up to 10 GW.

Ambani, one of the wealthiest people in the world, added: "We will continue to invest, build, and collaborate with global players to achieve the highest reliability, efficiency, and economies to deliver high-quality, reliable power at affordable prices to our customers both in India and markets worldwide."

Reliance Industries, which owns the world's largest oil-refining complex in Jamnagar, as well as upstream energy assets, retail, and textile businesses, aims to become a company with net-zero CO2 emissions by 2035. European energy majors like Shell and BP have pledged to achieve net zero by 2050.

In June, Ambani announced Reliance Industries planned to invest Rs 750 billion ($10.1 billion) over the next three years in clean technologies, including PV cells, batteries, electrolyzers, fuel cells, and green hydrogen.

Of the pledged investments, Rs 600 billion will be used to build four so-called giga-factories in Jamnagar to manufacture renewable energy equipment, and Rs 150 billion in the value chain, partnerships, and future technologies.

In August, Reliance Industries invested $50 million in Ambri, which is developing long-duration energy storage systems for renewable power. Other investors in the Massachusetts-based company include Paulson & Co. and Bill Gates.

For the long run, Reliance Industries wants to build 100 GW of solar capacity by 2030.

Solar expansion

REC, which has two manufacturing facilities in Norway for making solar-grade polysilicon and one in Singapore making PV cells and modules, has seen multiple changes of ownership in its 25-year history.

The company was previously acquired by Bluestar, a subsidiary of Chinese state-owned conglomerate Sinochem Holdings, when publicly traded on the Oslo Stock Exchange for $640 million and taken private in 2015.

Reliance Industries said it will support REC's planned expansions, including the addition of 2-3 GW of annual cell and module capacity in Singapore, where its current capacity stands at 1.8 GW. Other plans include a new 2 GW cell and module plant in France and a 1 GW module plant in the US.

"REC's production capacity has limited the company in serving more customers in more markets which demand its cutting-edge high-quality products," REC said in a statement. "This new ownership will allow REC to rapidly boost its scale and better serve its increasing customer base and end consumers."

The company said it could grow to over 5 GW of capacity within the next two to three years in Singapore, Europe, and the US with the added financial heft of its new owner.

Reliance Industries said its planned giga-factory in Jamnagar will adopt REC technology, and that the acquisition will provide the Indian conglomerate with a global platform to expand its renewable energy business.

Value chain enhancement

Separately, the RNES unit is buying a 15.5% stake in Sterling and Wilson via a preferential allotment and 9.7% from Indian conglomerate Shapoorji Pallonji and Co., while making a public offer to acquire another 25.9%.

RNES will acquire 40% of Sterling and Wilson, and Shapoorji Pallonji and Co. and Khurshed Daruvala—chairman of Sterling and Wilson—will make up the remaining balance if RNES receives offers equivalent to less than a 11.1% stake from the public market.

RNES has priced the shares at Rs 375. Sterling and Wilson's shares closed at Rs 461.5 on 11 October.

"Sterling and Wilson, with its engineering talent, deep domain knowledge, global presence, and experience of executing some of the most complex projects globally, will become an important part of our solar value chain," Ambani said.

Reliance Industries said it expects the acquisitions will add engineering capabilities to its renewable manufacturing facilities in Jamnagar.

Sterling and Wilson has participated in 257 solar power projects with a total capacity of 11.4 GW via its offices across 24 countries, according to its website.

Daruvala said the partnership provides his company with the ability to gain more footholds globally as an EPC provider, without elaborating.

National drive

With the acquisitions, Ambani said he is confident that Reliance Industries will be the biggest contributor to India's renewable expansion for the next decade.

India, the world's third-largest GHG emitter, previously committed to reducing the emissions intensity of its GDP by 33-35% by 2030 compared with 2005 levels. The country also is aiming for a 40% share of non-fossil fuel sources in its power mix by 2030.

However, the Indian government has not updated the country's Nationally Determined Contribution since 2015—considered the gold standard commitment for actual emissions reductions—and is yet to set reduction targets in absolute terms.

When large hydropower projects were taken into account, official figures showed India's installed renewable energy capacity reached 141 GW as of 16 June, or 37% of the country's total. Total solar power amounted to 41.1 GW while wind stood at 39.4 GW as of 31 May.

In the October update of its India Power and Renewables Market Profile, IHS Markit said the 40% target by 2030 is achievable, given the trends in renewable capacity addition. Total renewable installed capacity—excluding large-scale hydro—has grown from 58 GW at the end of fiscal 2017 to more than 94 GW at the end the of FY 2021, or 31 March.

"Renewable additions in India are mainly driven by long-term visibility of targets, demand for competitive tenders, and the falling cost of wind and solar," the IHS Markit analysts wrote.

The country aims to have an installed renewable generation capacity of 175 GW by the end of 2022, including 100 GW of solar. It also set a target for 450 GW of renewables by 2030, including 280 GW of solar, 110 GW of onshore wind, 30 GW of offshore wind, and the remainder coming from biomass and small hydropower projects.

IHS Markit estimates India's solar power could reach 743 GW, assuming the availability of wasteland and rooftops for installations. The country's current renewables pipeline of 50 GW is dominated by solar projects.

With New Delhi willing to provide financial incentives, energy experts said foreign investors have been pairing up with local independent power producers to tap the solar market despite issues with timely payments, land acquisition, and grid access.

But IHS Markit warns that the pace of capacity additions remains below the government's annual target, citing additional levies on solar products from China as one of the reasons.

Chinese solar cells and modules had faced a 14.5% safeguard duty until the end of July. From April 2022, India will impose an import duty of 40% on Chinese modules and 25% on cells.

"These duties, imposed to support the local manufacturing industry, have so far remained counter-productive, as the share of imports continue to constitute the majority of India's solar supply chain due to their cost competitiveness," the IHS Markit analysts said.

Posted 12 October 2021 by Max Tingyao Lin, Principal Journalist, Climate & Sustainability, IHS Markit

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