Dealmaker Saurabh Bhasin of Trilegal

Bar & Bench recognizes Saurabh Bhasin as the Dealmaker for his role in Morgan Stanley Infrastructure Partners’ (MSI) investment in Continuum Wind Energy. We understand that the transaction was complex and involved several regulatory issues and project risks. Saurabh and his team not only provided valuable legal advice to their client (MSI) with regard to structuring the deal, but also helped the transacting parties to come together and close the complex deal..The Deal.Morgan Stanley Infrastructure (through a group company) acquired a majority stake in Continuum Wind Energy, which (along with its subsidiaries) is developing and operating a number of wind power projects in various states in India, including a 175 MW wind power project, which it is developing in the state of Maharashtra..The deal was valued at Rs.1200 crore ($210 million) and is one of the biggest private equity investments in the wind energy sector in India..Other counsels on the deal included the Hong Kong office of Davis Polk & Wardwell led by Partner Kirtee Kapoor, who acted as international counsel to MSI. Desai & Diwanji were the counsels for the Promoters of Continuum Wind Energy and the team was led by Partner Amit Khansaheb..You can read our news report on this deal..We spoke to Saurabh Bhasin on the challenges faced during the transaction and his thoughts on the current market scenario in the Energy and Infrastructure space..Dealmaker: An Introduction.Saurabh Bhasin is a partner in Trilegal’s Energy & Infrastructure practice. He entered Trilegal’s partnership in August 2011. He is a graduate of Cardiff University and did his LLM from Cornell Law School..Saurabh has over 9 years of experience in project development, acquisition and finance in various sectors including oil and gas, power, roads, airports and social infrastructure..Role in the Deal.Saurabh Bhasin: “We advised MSI, as their Indian legal counsel, in relation to this investment. Our scope of work included conducting a due diligence on the projects. We advised the regulatory regime governing the wind power sector in India, including various project consents that are required for completing the projects. We also advised MSI on structuring the transaction, which involved a multiple stage closing and investment strategy”. â€¨.High point of the deal.“This was one of the largest investments by a PE investor in the Indian wind energy sector and involved a lot of moving parts and regulatory challenges. Given the size of the investment and the number of projects (in different stages of development) that were involved, we had to take into account a host of regulatory issues and project risks (particularly for projects under development) affecting the transaction. I would say the highlight of the transaction was to be able to successfully close a complex transaction in a relatively short time frame..I should also say here that it was an incredible experience working with Harsh Aggarwal and the rest of the MSI team who were extremely professional in the manner in which they undertook the transaction”..Difficulties/Challenges faced during the transaction.“Nothing ever goes seamlessly and one of the key skill for a good lawyer is to be able to trouble shoot and to come up with innovative solutions to problems that invariably arise. Given the magnitude of the investment involved and the different stages of the development of the projects, we had to ensure that adequate safeguards were built in to the transaction documents to protect MSI’s interests..We identified various regulatory and project related risks (such as those relating to existing contracting arrangements, land, consents and approvals) and found commercially workable solutions to mitigate those risks before MSI’s investment into the company”..Current market scenario in the Energy and Infrastructure sector.“As you know, foreign investment in the energy and infrastructure space has been relatively subdued in the past 12 to 18 months, with the deal sizes shrinking significantly due to policy uncertainty..The thermal power sector is a prime example of how policy paralysis on part of the government has led to a complete drying up of not only foreign equity capital, but also foreign debt in the sector. Having said that, transactions in the renewable (particularly wind) sector seem to be faring much better. We have had a robust deal flow and have seen a lot of activity in terms of investments in the renewable sector, be it wind, solar or hydro, and have acted for strategic as well as financial investors in the recent past..In fact, the firm has a significant pipeline of deals involving PE investments into the power sector. One reason for such robust transaction flow in this sector could be attributed to promoters taking a more realistic view on the valuation of assets. Given the difficult economic environment, we have even seen certain distressed/partially-distressed assets coming on to the markets. This gives cash-rich PE and foreign investors the opportunity to cherry pick assets from the market.”.Challenges that foreign investors face while investing in Infrastructure or energy projects.“As I mentioned previously, foreign investment in the energy and infrastructure sector has reduced substantially in the last 12 to 18 months due to increased policy, tax and regulatory risks for foreign players..With respect to the energy and infrastructure sector specifically, some of the key challenges that foreign investors have to deal with include complex (and often archaic) regulatory regimes for investment into and development of projects, multiplicity of legislation, lack of single window clearances, delays in acquiring land and other related complexities which often lead to extremely complicated deal structuring..Also, recent changes in the tax laws, specially the retrospective tax amendment arising out of the Vodafone case, have affected investor sentiments to a large extent. However, I think the fundamentals of the Indian economy are still strong and that with the right combination of regulatory control and free market philosophy, we can restore investor confidence and increase the pace of building much needed infrastructure capacity in the country”..Any other thoughts related to wind energy sector.“The wind energy sector is generally perceived as a successful model, which has attracted a significant degree of interest and investment from private and foreign participants and both the central and state governments should consider replicating the model to attract investment in other renewable sectors such as solar power. This transaction is a testament of the scope of investment that the Indian energy and infrastructure sector can attract”.