Tata Power Plans Rs 60,000-Crore Capex For Renewable Capacity Expansion Over Five Years

Tata Power Co., days after announcing sale of stake in the renewables unit, plans to spend Rs 60,000 crore to expand the capacity of its clean-energy business over the next five years.

Of the total amount, 75% will be raised through debt and the rest through equity, Praveer Sinha, chief executive officer at the power generator, told BloombergQuint in an interview. Despite that, the company plans to keep the leverage ratio (debt/Ebitda) between 1.5 and 1.6 times after expansion, Sinha said.

The company’s existing renewable energy portfolio stands at 4.9 gigawatt, with 1.6 GW under construction. The company is aiming to scale it more than 20 GW by FY27.

Tata Power, the CEO said, will look “at inorganic acquisition in renewables space quite aggressively”, after considering factors such as assets, quality of equipment, power purchase agreements or PPA and offtake arrangements.

India’s pledge to turn carbon neutral by 2070 is fueling a shift into solar, wind and hydrogen. Conglomerates, including billionaires Mukesh Ambani and Gautam Adani’s groups, are committing billions to green energy to benefit from this opportunity. While Reliance Industries Ltd. plans to invest $10 billion (Rs 75,000 crore) in the low-carbon energy ecosystem in three years, Adani has pledged to invest $50-70 billion (Rs 3.81-5.34 lakh crore) in renewable energy, including in green hydrogen, by 2030.

Tata Power’s capex announcement comes soon after the company agreed to sell stake in its renewable business to a consortium led by the U.S.-based BlackRock Real Assets. The consortium, also comprising Saudi sovereign fund Mubadala, will invest Rs 4,000 crore in Tata Power Renewable Energy Ltd. via compulsorily convertible instruments for a 10.53% stake.

Analysts, however, downgraded Tata Power citing less-than-expected deal valuation. Sinha, however, expects them to revise ratings once they see “the complete potential of the deal”. “The deal has been done at an attractive valuation keeping the present scenario in mind, which is the next one year.”