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Tata Power may launch IPO or rope in partner for renewable business

According to reports, Tata Power Company Ltd has carved out a special purpose vehicle to build a robust renewables portfolio.

The company plans to invest up to Rs 4,500 crore in the next three years in the SPV, said Rahul Shah, Chief-Business Development, India Business and Renewables of Tata Power.

The special purpose vehicle Tata Power Renewable Energy Ltd may launch an initial public offer (IPO) or rope in an equity partner in the next three-five years, Shah told Business Line. Energy business contributes nearly five per cent to Tata Group’s overall revenue, according to the company’s investor presentation last month.

All new renewable capacity additions by Tata Power would be done under the SPV, while the existing projects would continue to remain with the parent firm.

The private power sector player has placed orders for 182 MW of wind energy. Currently, it has installed capacity of 375 MW of wind energy. It expects to set up 40 MW of solar power in the next financial year. Of this, orders have been placed for 25 MW. Till now, it has 28 MW of installed solar capacities.

Shah said that the company would spend Rs 1,250 crore in 2013-14 to add additional capacity in renewable portfolio. A similar investment every year is projected for the next three years. The funding is to be made through 70 per cent debt and remaining equity.

A Bloomberg report quoting Goldman Sachs said more than $395-billion annual investments are likely to pour into renewables by 2020. “Our mandate is that 20-25 per cent of the total installed capacity must come from clean energy,” Shah added. At present, Tata Power has an installed generation capacity of 7,700 MW in India and a presence in all the segments of the sector — generation, transmission, distribution and trading.

According to Shah, it is the time for a fixed tariff mechanism for solar power. A tariff of Rs 8 a unit, with 10 per cent of fluctuation, is ideal.

The gap between cost of grid power and solar has narrowed over the years. The cost of solar power generation has dropped to Rs 8 for every unit from Rs 16 a unit in the past two-and-half years. On the other hand, electricity from grid is hovering over Rs 3-4.5 for each unit.

The Government is toying with the idea of introducing viability gap funding in the second phase of National Solar Mission.

“The fixed tariff model is a sustainable model for solar power sector. This is because variable costs such as EPC, interest rates and project cost have stabilised,” Shah explained.

Shah said the company is also eyeing renewable projects globally. “Regulatory markets and credibility of offtake of power is our main focus,” he added.

One comment

  1. People invested in Mutual Funds, which in turn invested in Politically backed companies in Renewable Energy sector, but, today we are seeing Rs. 900 Crore loss, but, not an equivalent amount of Solar or wind energy produced. Hence, public money is wasted by CORPORATE COMPANIES LISTED IN BSE. Who is responsible and how do we fix the responsibility of these Oxford or Cambridge learned professionals certified such investments and the poor small MF investors have their wealth Eroded. Poor / small MF investors felt proud for having helped the nation’s growth, but, the benefit was to few people in corporate sector, including ill intended promoters, their CEOs or Such management. Many have gone bust.

    Why to fund only the large corporate, through IPO etc, instead why Government can’t initiate IPO (or such fund creation which is interest free i.e most low cost fund collection mechanism) and collect the money, and then lend at very low cost to RE developers to sign rs. 4/kwh PPA with 20% equity from such developers and be on the board of such RE developers till the loan repayment (max capacity per entity shall be 100 MW in 5 years) and create many RE Developers and reduce the TARIFF as many small investors have invested. Let Government assure the return like Bonds or little better and let small investors help RE generation.

    Thus, we can forget the Viability Gap Funding or such wrong mechanism to help only Large companies, which have failed the corporate sector. Kindly note the noted investor Mr. Rakesh Jhunjunwala stated in a program in Bloomberg TV that not to buy shares of MNC due to poor corporate governance. So, time has come to support new generation (first time) entrepreneurs with hand holding, mentoring with necessary checks, with certified business plans and financial model etc…. Please note that Satyam Computer was saved with hand holding by the government and why not small entrepreneurs with such innovative idea of IPO for Green Energy development in Rural area with transparency in giving loans / funds to new educated entrepreneurs with necessary control and stakes till the loan repayment to avoid NPA, thus, create large amount of jobs…..

    Hope all research organisations and Government, SEBI take note of such innovative method of arranging finance and promoter “Entrepreneurial Funding” with small project allotment at low tariff to many entrepreneurs in rural area instead of large corporate mis governance !!, as we are seeing now-a-days…..

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