Tata Power Renewable Energy (TPRE), a subsidiary of Tata Power, is set to acquire Welspun Renewables Energy (WRE), which is a part of the Welspun Group. The acquisition is being made at an enterprise value of ₹9,249 crore and comprises WRE’s 1,140 MW power generation capacity (990 MW solar plus 150 MW wind). Of the capacity being acquired, 1,000 MW is currently operational.
The acquisition is in line with Tata Power’s goal of having 30-40 per cent of its aggregate generation capacity under renewable power by 2025. Tata Power along with its subsidiary TPRE operates about 800 MW of renewable (solar and wind) power generation capacity. Apart from that, another 400 MW capacity is currently under implementation.
What the deal means
At the deal value of ₹9,249 crore, TPRE will be able to acquire a largely operational portfolio of solar and wind power assets at a valuation of about ₹8 crore/MW. At a going rate of about ₹5.75 crore/ MW and ₹6.5/ MW for solar and wind power projects, respectively, the acquisition appears a tad expensive. The existence of long-term power purchase agreements (PPA) with state distribution utilities for the sale of power from these plants will provide assured buyers. Other details such as the tariffs specified under the PPA, which are not yet available, too will matter.
Solar and wind power tariffs in each state are set by the respective state electricity regulatory commissions (SERCs) which provide for rates that allow cost recovery and a certain return on equity. Competitive bidding for solar power projects, where the tariff set by the state regulator serves as the ceiling rate has, however, seen solar power tariffs slip below the regulated rate.
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.