Shortlisted for a green deal
? According to newsflow, SCI has been shortlisted to acquire Mytrah Energy for
c.2.9GW of renewable assets. The deal is reportedly worth c.US$2bn.
? Mytrah Energy’s FY19 EBITDA was US$190m with a US$15.6m net loss. It
turned profitable in 1H20 with US$3.9m net profit on US$6.5m EBITDA.
? Deal seems expensive but if it goes through, SCI could expand its renewable
energy capacity to 8.9GW and enhance its returns from the assets.
? Reiterate Add, with unchanged SOP-based TP of S$2.96.
Shortlisted for the acquisition of 2,935MW renewable energy assets
Livemint reported that SCI, Enfinity Global Inc, and JSW Group have been shortlisted to
acquire green energy producer Mytrah Energy India Pte Ltd. The deal is potentially w orth
c.US$2bn. Mytrah Energy currently has 2,235MW of renew able assets (1,700MW w ind,
535MW solar) and 700MW of projects under development. SCI currently has 5,287MW of
renew able assets (4,567MW w ind, 650MW solar, 70MW batteries) and 1,349MW of
projects under development. Acquiring Mytrah Energy w ill lift SCI’s total renew able assets
to 8,871MW (including projects under development), representing c.89% of its 10GW by
2025 target.
Mytrah Energy: high debt and not fantastic profits
Mytrah Energy posted US$190m EBITDA and US$15.6m net loss in FY19. In 1H20, its
EBITDA shrank to US$6.5m but it turned in a US$3.9m net profit. We suspect this could
be due to a reduction in its equity stake in loss-making assets. It had a debt-to-equity ratio
of 7.4x in FY18 and total debt of US$1.35bn in FY19. It has made several failed attempts
to sell its green energy assets in the past, the latest being discussions w ith CPPIB and
private equity firm KKR w hich fell through. Mytrah Energy w as listed on London’s
Alternative Investment Market in 2010, raising $80m of equity. In 2018, its chairman and
founder Ravi Kailas acquired shares from other shareholders through a special purpose
vehicle, Raksha Energy Holdings, and delisted Mytrah. Kailas and his family currently own
close to 80% of the company, w ith the balance held by a few institutional investors.
Makes more sense to buy small or pay for a lower price
We do not think SCI w ould offer US$2bn for Mytrah Energy as that w ould mean raising its
debt/equity. We also believe a partial acquisition of Mytrah Energy’s assets makes more
sense than taking up its entire portfolio of 2.9GW. Note that SCI reduced its net
debt/EBITDA from 6.6x in FY20 to 5.6x in FY21 and remained disciplined on this front. Its
Thai peers are trading at debt/EBITDA of 6.1x, and its China peers at 5.9x.
Maintain Add and SOP of S$2.96; benefits from IEX tariff rally
Separately, w e expect SCI to benefit from the rise in Indian IEX tariff to c.Rs7.87/kw hr in
Apr on the back of stronger demand and some pow er shortages. We see strong upside for
its conventional segment as it has secured demand for 85% of both plants 1 and 2’s output
w ith medium- and long-term term contracts from 2Q22. Our TP implies 10.5x FY23F P/E.