Khopoli Investments, a fully-owned subsidiary of Tata Power, has signed an agreement with South Africa-based coal producer Exxaro Resources for the divestment of its 50% stake in Cennergi, a South African joint venture, for $106m (ZAR1.5bn).

Cennergi, which owns two windfarms in South Africa, is a 50/50 joint venture (JV) company of Khopoli and Exxaro. The two windfarms owned by Cennergi are Amakhala Emoyeni (134MW) and Tsitsikamma Community Wind Farm (95MW).

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The energy generated by the two windfarms will be supplied to the state power utility Eskom under a 20-year power purchase agreement (PPA).

Tata Power managing director and CEO Praveer Sinha said: “The decision to monetise this South African asset is in alignment with our stated strategy to deleverage the Balance Sheet by divesting sub-optimal size international assets.

“The proceeds from such sale would be re-invested in emerging areas where there is a huge growth opportunity.

“The Company will focus on renewable power, power distribution and service-led businesses in India which will bring in greater value and help us align with the emerging consumer needs.” ABSA Bank was the sole advisor to Khopoli for the transaction.

The agreement is expected to complete by Q3 2020 whilst the share purchase agreement is subject to regulatory approvals. Following this deal, Exxaro Resources will be the only owner of Cennergi.

Exxaro Resources CEO Mxolisi Mgojo said: “The collaboration between Exxaro and Tata Power over the past seven years to develop these projects to their current status has been commendable and an outstanding success in South Africa’s implementation of its energy strategy.

“As a South African-based company, Exxaro is pleased with this opportunity to consolidate its interest in this renewable energy asset at a time in South Africa where we need energy security as we respond to increasing negative sentiment towards coal-based electricity generation.”