In this article, we will be discussing the recent investment into Tata Power Renewables, the subsidiary of Tata Power of around Rs. 4,000 Cr. by the Private Equity player BlackRock. How will this investment will help the Renewable business segment of Tata Power and how the company structure will be affected post this investment, let’s discuss this all in this article as we move ahead.
About Tata Power Renewables:
- Tata Power Renewables is one of the largest renewable energy companies in India. Its vertically integrated operations currently have approximately 4.9 GW of renewable energy assets.
- Tata Power Renewables Limited is a renewable energy subsidiary of Tata Power Company Limited
- On Thursday 14th April 2022, Tata Power announced that BlackRock Real Assets-led Consortium, including Mubadala Investment Company, has entered into a binding agreement to invest in Tata Power Renewables Energy Limited, a renewable energy subsidiary of Tata Power.
- BlackRock Real Assets with Mubadala will be investing around Rs. 4,000 Cr. i.e., around $525 million by way of equity and compulsorily convertible instruments for a 10.53% stake in Tata Power Renewables.
- The SPV will invest Rs 4,000 crores with 2 tranches of Rs. 2,000 crores each where 1st tranche will be done through Equity and 2nd through convertible securities.
- As per this raise of investment, Tata Power Renewables is having a base equity valuation of Rs. 34,000 Cr.
- The final shareholding will range from 9.76% to 11.43% on a final note.
- TPREL will become the holding company of all renewable businesses. All the future renewable businesses will be formed under this holding company
- This transaction is subject to customary approval and is expected to close in 2-3 months.
- The newly created platform will consist of 5 distinct businesses delivering long-term, customer-oriented solutions. It will house all renewable energy businesses of Tata Power including those in Utility-Scale Solar, Wind & Hybrid Generation Assets, Solar Cell & Module Manufacturing, Engineering, Procurement & Construction (EPS) Contracting, Rooftop-Solar Infrastructure.
- The broad-based portfolio of assets ensures diversified yet stable revenue sources including 25-year fixed-price PPAs for grid-connected utility-scale projects.
- The proposed investment is expected to fund Tata Power Renewables’ aggressive growth plans.
- Over the next 5 years, Tata Power Renewables aims to achieve a portfolio of over 20 GW of renewables assets and a market-leading position in the rooftop and electric vehicle charging space across India.
Tata Power- The Most Comprehensible Renewable Energy Platform
- Tata Power is currently having a renewable capacity of 4.5 GW and the company expects to take it to 20 GW in the coming period.
- Renewable Energy Business Segments of Tata Power Renewables are:
- Utility-Scale Solar, Wind, Hybrid, Storage & Group Captive
- Generating Capacity of the segment in FY22 at ~4900 MW (1200 MW under construction).
- Engineering Procurement & Construction (EPC) & Power Purchase Agreements (PPAs)
- Order wins in FY22 at ~553 MW
- PPA Model in FY22 at ~73 MW (including Under Construction)
iii) Electric Vehicle Charging:
- Electric Vehicle Charging Infrastructure
- Number of Charging points installed till FY22 are – Home: 13,107, Public: ~1,871, Bus: ~212
iv) EPC & Manufacturing:
- Large Projects Solar EPC & Solar Module manufacture
- EPC Order Wins stood at ~3,250 MW; LOA awaited for ~2,000MW
- Manufacturing Capacity at 650 MW Module and 550 MW Cells
v) Solar Pumps:
- Government Tenders & Direct consumer sale
- The number of Pumps installed till FY22 is at ~28,500
Structure of Tata Power:
i) Existing Structure:
- Businesses will be consolidated under a single entity where All the renewable businesses will be brought under a single umbrella
- Generation Company, EPC Company, and New Businesses will be under a single umbrella.
- Tata Power Renewables Energy Limited will be the holding company
- This will lead to optimization in cash upstreaming, capital deployment, fundraising, and leverage management
ii) Post-Investment Structure:
Entities Involved in the Transaction:
1) Tata Power:
- India’s largest integrated power company with an installed capacity of 13,171 MW, presence across Generation, T&D, and Renewables. 33% of the portfolio is clean and green.
- With the development of a pipeline of ~ 1.6 GW, the current Solar & Wind portfolio is ~ 4.9 GW
- The company is number 1 in Solar EPC Company in India with 30+ years of manufacturing experience: 1 GW of cell and module manufacturing capacity; another 4 GW under development
- Strong brand in solar rooftop and pump business with pan India distribution network
- The company is having Largest EV chargers installation of over13,000 home chargers & more than 2,200 captive, public & bus
- BlackRock Real Assets seeks to help clients access real assets that could help meet their investment goals by providing a distinct range of well-defined, outcome-orientated strategies, along the investment risk-return spectrum.
- With over 400 professionals in 30 offices managing over $70 bn in client commitments, it partners with clients to provide solutions tailored to individual portfolio needs.
- Mubadala Investment Company is a sovereign investor managing a global portfolio to generate sustainable financial returns for the Government of Abu Dhabi.
- Mubadala’s $243.4 billion (AED 894 billion) portfolio spans six continents with interests in multiple sectors and asset classes. Mubadala’s Digital Infrastructure unit invests in physical assets around the world underpinning the global trend of digitalization and increasing demand for connectivity, data storage, and compute power.
Renewable Industry Overview:
- Out of the total installed power generation capacity of 393 GW as of Dec’21 in India, renewables form around 27% of the same (105 GW).
- The government of India has a target to install 175 GW of Renewable Energy by 2022 and 500 GW by the year 2030.
What Should Investors Do:
The investments from such private equity investors are not only positive for the company (Tata Power) but the overall Power Sector of India as well. It shows the confidence of the investors in the Indian Power Sector. Such confidence from foreign players in the renewable business of Tata Power, the brand image of Tata Group, and the aggressive growth plans of the company are very beneficial for the company and hence individuals should keep this stock on the radar.
Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.