Asia’s renewable energy sector is set to make a mark in the leveraged finance market with a loan of at least US$700m supporting Blackstone Group’s proposed purchase of a majority stake in Chinese solar energy device maker Growatt Technology.
Blackstone is looking to buy the stake of around 52% held by Growatt’s founder for about US$1.5bn. The private equity firm is seeking debt financing with a gearing multiple of 4.25x–4.50x in what would mark a rare instance of a leveraged loan for a renewable energy business in Asia.
Quite a few banks are keen to participate given Growatt's strong underlying business in a sector that is much sought-after thanks to global efforts to reduce carbon emissions.
“The company’s product diversification is what makes it an appealing asset,” said a banker involved in the deal. “On top of its photovoltaic inverter business, the company also provides energy storage solutions, which is seeing a growing demand and is important in ensuring a stable supply of renewable energy in the long run.”
Growatt is one of the world’s top four suppliers of photovoltaic and storage hybrid inverters and posted a profit of Rmb1.21bn (US$175m) for 2022, up 112% from the year before. It manufactures solar inverters, energy storage products and smart energy management systems and distributes them to about 1.9 million residential and commercial and industrial customers in over 180 countries and regions.
“It is a good asset as it ticks the right boxes,” said a Hong Kong-based leveraged finance banker. “It is among the top global storage hybrid inverter suppliers and that ties in with the whole sustainable lifestyle that many are trying to attain.”
Major economies in Asia Pacific have committed to curb or reduce carbon emissions by 2030 and reach carbon neutrality or net-zero by 2050–70, which requires a sustained transition towards clean and renewable energy sources, according to a Moody’s report from April.
“Asia is already the leading region for battery production in the electric vehicle market, which will likely contribute to the increasing deployment of battery storage for the power sector in the medium and long term,” said Mic Kang, senior credit officer at Moody’s and author of the report.
Deal-starved market
Growatt’s potential LBO follows two previous attempts at an IPO within the past year, both of which foundered because of challenging market conditions. The first attempt was in November last year when Growatt pre-marketed a float of up to US$1bn and the second was in May this year when it delayed an IPO of about US$300m–$400m.
With public equity missing out, the private equity and levfin markets are stepping up, which is good news for the loans product as North Asia has been starved of such event-driven financings this year.
“Many banks are relying on Growatt’s deal to feed their levfin teams this year,” said a second Hong Kong-based leveraged finance banker at a global bank. “The other transactions are either slow moving or have fallen away.”
No LBO loans from North Asia have launched this year, although some have been in the works.
Two banks are providing an LBO loan of around US$1.5bn backing the proposed take-private of Chinese data centre operator Chindata Group from the Nasdaq stock exchange, in a sweetened US$3.16bn deal with US private equity firm Bain Capital. Shanghai Pudong Development Bank and Industrial Bank are providing the debt financing. Only limited sell-down is expected at a later time.
Another financing could emerge as a result of Hong Kong-listed tissue and nappy maker Vinda International Holding’s potential management buyout. Brazilian pulp maker Suzano and several private equity firms – including Bain, CVC Capital Partners and DCP Capital – have moved ahead in the bidding for Essity’s majority stake in Vinda, with some looking to form consortiums.
Banks have been in talks since May for a loan of about US$1bn–$1.5bn backing the transaction.
Blackstone declined to comment on the potential LBO for Growatt, while the solar inverter firm did not respond to queries.
(Additional reporting by Apple Li)