ArcelorMittal Throws in Hat to Buy Sprng Energy in Green Steel Push

ArcelorMittal, the world’s biggest steel maker is making a play for Sprng Energy, Indian renewable platform of Actis, as the steelmaker looks at cleaner energy sources to decarbonise production around the world and in India, people aware of the development have told news agencies.

This arguably is the first time in India a steel producer is looking at such large M&A opportunities in green energy. Steel production is source of up to a tenth of global carbon-dioxide emissions. Steel firms will eventually be under pressure to clean up, preferably using green hydrogen. It is already an investor in CSP specialist, Heliogen.

ArcelorMittal joins the buyout race to compete with Royal Dutch Shell, Adani Group, Singapore’s Sembcorp Energy, and Canadian pension fund CPPIB after Macquarie, another initial contender chose to opt out of this potentially $2 billion transaction (enterprise value) which saw 17 initial contenders, the sources mentioned above added.

Last year, Actis had mandated Bank of America to officially launch the sale process for Sprng Energy. This is the second platform that Actis had created after it sold Ostro Energy, its original green power platform, to ReNew Power Ventures in 2018 at an enterprise value of $1.5 billion.

Sprng Energy has signed power purchase agreements (PPAs) for 2.6 gigawatts (GW), of which 2.1 GW will be operational by March 2022, while another 600 MW is expected to be operational by March 2023. The FY22 ebitda for all the contracted assets is pegged at $220 million.

The acquisition is part of a $10 billion global green transformation strategy that kicked off in 2020 and is spearheaded by Group CEO Aditya Mittal (46), who took charge last year from his father Laxmi Mittal of the sprawling empire that stretches across Europe, Asia, Americas and Africa. Steel companies, much like fossil fuel behemoths are under pressure from policy makers, climate activists and Wall Street to shun legacy practices of carbon emission. Goldman Sachs is advising the company.

Arcelor Mittal’s India operations are centred around Essar Steel India, located in Hazira, Gujarat, which it acquired in 2019, for ₹42,000 crore – the largest asset sale through the country’s bankruptcy courts – with its 40% joint venture partner Nippon Steel Corporation of Japan. The technical diligence is ongoing to be followed by management meetings and final bids by mid-March.

The company has already created global renewable subsidiary to build a strategy around carbon capture, production of green hydrogen – both as a fuel and a reductant, energy storage that will help convert many of their coal burning blast furnaces, the carbon-heaviest of steelmaking technologies, and slash emissions.

The plan is to reach 600,000 tonnes by 2022, deliver its 30% CO2 emissions target by 2030, and achieve net zero by 2050 using hydrogen in the more advanced direct-reduced-iron (DRI) and electric-arc-furnace (eaf) plants, instead of the prevailing fuel – natural gas. European steelmaking has been traditionally led by coking coal fired blast furnaces that are used to soak up oxygen from oron ore but are doubly carbon-intensive as well as generate ‘dirty’ energy to fire up the furnaces.

Arcelor Mittal is also keen to use smart carbon with lower carbon footprint, again utilising hydrogen.