Targets investments up to Rs 4,500 cr; creates new vertical for expansion

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.

SOLAR TARIFF

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.

OVERSEAS

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

siddhartha.s@thehindu.co.in

(This article was published on February 13, 2013)
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