Tata Power eyes more purchases in wind and solar push

NEW DELHI Tue Nov 26, 2013 3:29pm IST

Related Topics

Stocks

   
Priyanka Gandhi Vadra, daughter of Congress party chief Sonia Gandhi, adjusts her flower garlands as she campaigns for her mother during an election meeting at Rae Bareli in Uttar Pradesh April 22, 2014. REUTERS/Pawan Kumar

Election 2014

More than 814 million people — a number larger than the population of Europe — are eligible to vote in the world’s biggest democratic exercise.  Full Coverage 

NEW DELHI (Reuters) - Tata Power (TTPW.NS) is looking for more acquisitions as part of a $260-million-a-year investment push into renewable energy, following last month's purchase of a wind farm in western Gujarat from AES Corp (AES.N), a senior official said.

Part of the tea-to-telecoms Tata group, the firm is India's third-largest listed utility by revenue in the Thomson Reuters India Index.

Primarily a thermal power utility, it is targeting rapid expansion in renewables at home and overseas, aiming to add about 150 to 200 megawatts (MW) of wind capacity and 30 to 50 MW of solar power every year.

Its newly acquired plant has a capacity of 39.2 MW.

"After we announced the Gujarat acquisition, we have got a lot of interest from other owners of solar and wind operating assets who want to exit their investment," said Rahul Shah, the chief of business development for India business and renewables.

"So are we are evaluating a lot of these opportunities," he told Reuters in a telephone interview.

As coal and gas shortages and populist tariff regimes hobble the performance of thermal power stations, renewable energy players such as Tata and Welspun Energy want to tap the sector's potential in a growing but energy-starved economy.

But problems with acquiring land for projects, poorly enforced government policies, and a race to the bottom in bidding for solar projects are a drag on renewables growth, said Shah.

The margins on renewable energy are lower, at around 12 percent to 18 percent versus about 20 percent to 30 percent in the thermal sector, Shah said. "But in renewable energy it is a more predictable performance and a predictable return," he said.

Although the firm will look to sell a stake in its renewable business at some point, it has no timeline for this, Shah said.

The move could take the form of an initial public offering - although current market conditions are unfavourable - or a sale to a private investor, he added.

Tata operates about 400 MW of wind projects and 30 MW of solar. Shah said he hoped to buy more projects as soon as this fiscal year, which ends in March, and is evaluating projects worth a total of 370 MW for possible purchase.

India has targeted doubling its renewable energy capacity to 55,000 MW by 2017, from nearly 27,000 at the start of this year. Renewables contribute about 12.5 percent of India's energy, the 2012/13 report by the New and Renewable Energy Ministry shows.

Graphic on renewable energy: link.reuters.com/seb94v

Hurdles remain for the likes of Tata, Shah said. For example, rules stipulating that India's 28 states must source a certain part of their energy from renewables have not been properly enforced. Electricity tariffs paid by states can also be too low for companies to make money.

Other investors have echoed Tata's concerns. Welspun Energy, which is eyeing $1.6 billion of new investments by 2017, told Reuters in October that land acquisition and poor transmission networks remained problematic.

JinkoSolar Holding (JKS.N), a China-based solar panel maker, told Reuters that low prices for solar products, cut-throat competition and high interest rates dragged on growth.

Shares of Tata Power were down 0.9 percent by 3:29 p.m., versus a fall of 1 percent in the Nifty.

(Additional reporting by Krishna N Das; Editing by Tony Munroe and Clarence Fernandez)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Monsoon Forecast

Monsoon Forecast

South Asia monsoon seen below-average to average in 2014 - WMO.  Full Article 

Solar Dispute

Solar Dispute

Green groups urge U.S. to drop solar trade case against India.  Full Article 

Oil Imports

Oil Imports

India to make May-July oil payments to Iran - sources.  Full Article 

Facebook Earnings

Facebook Earnings

Facebook Q1 revenue grows 72 percent on rising mobile ads.  Full Article 

DLF Shares

DLF Shares

DLF slides 3 percent, underperforms rivals.  Full Article 

Rice Exports

Rice Exports

India may cede top rice exporter spot under Southeast Asian price onslaught.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage