Tata Power planning more acquisitions in renewable energy sector

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Friday, November 29, 2013: A senior official has revealed that Tata Power is planning more acquisitions, which is a part of a $260-million-a-year investment push into renewable energy. This comes in after last month’s purchase of a wind farm in western Gujarat from AES Corp.

Dealing majorly in thermal power utility, Tata Power is planning to target rapid expansion in renewables at home and overseas. The company aims to add about 150 to 200 megawatts (MW) of wind capacity and 30 to 50 MW of solar power every year. The plant that it recently acquired 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 renewable told Reuters. “So are we are evaluating a lot of these opportunities.”

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While companies like Tata and Welspun are trying hard to tap the renewable energy sector’s potential, 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, added Shah.

Shah further told Reuters that 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. “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. The move could take the form of an initial public offering – although current market conditions are unfavourable – or a sale to a private investor, Shah added.

According to Reuters, 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.

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