Tata Solar increasing its RE stakes in India

Tata Power which is one of India’s largest private sector power utilities has suddenly decided to go big in the renewable energy space, by buying one of the largest RE developers Welspun in a billion dollar deal. This will easily make Tata Power the biggest RE player in India taking its overall portfolio of RE capacity over 2 GW. While Tata Power has dabbled in the renewable energy space like other uitlities, it has never been too aggressive. It was only recently that Tata won one of the its first solar reverse auctions. Its subsidiary Tata Solar has also been not a very aggressive player, despite being one of the oldest solar power manufacturer in India.

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Other smaller upstarts have upstaged Tata Solar to become larger and bigger solar panel makers. This acquisition will catapult Tata power to become the largest RE developer. There had been speculation for a long time that Tata was leading the race to buy Welspun Renewable. There were other utilities such as Fortum and Sembcorp, who were in the running to buy Welspun’s large wind and solar power assets that were built in the early years of solar energy growth. In the last couple of years, Welspun has been pretty much absent from the bidding arena as its promoters looked to cash out of the renewables space. The company has been looking for buyers for more than a year now and now has finally managed to find a buyer for its assets.

The total portfolio size is more than 1000 MW in size, with most of it already operational. The vast majority of the capacity is solar energy, with around 15% being wind energy capacity. The total RE capacity of Tata Power is around 1100 MW, which means that the total RE capacity for Tata Power will now be around 2300 MW. The total EV for this is around INR 9300 crores which implies that the projects will be sold at around INR 9 crores or $1.3/watt. This is not expensive by any means since most of these projects were built when the costs of building a solar power plant were much higher (near INR 7-8 crores at least). This means that Tata Power has not paid a huge premium as was being speculated earlier.

Tata Power has been looking to expand rapidly in India’s fast growing market, with a target of 18 GW of capacity by 2022 from around 9 GW now. This deal should meet more than 10% of its next 6 year target at one go and also help meet its high green energy target that it has kept.