India’s Tata Power To Float Separate Company For Renewable Energy Assets
In a clear sign of increasing financial competitiveness of renewable energy projects vis-a-vis conventional power plants, one of India’s leading private sector power generators has carved out all its renewable energy assets into a separate company.
Tata Power has announced the launch of Tata Power Renewable Energy Limited as a separate company that will own and operate all the renewable energy assets of the parent company.
Tata Power will transfer control of renewable energy assets to Tata Power Renewable Energy Limited. Upon the completion of the transfer, Tata Power Renewable Energy Limited will control the operational capacity of 720 MW and the under construction capacity of 250 MW.
According to media reports, the new company will also look for equity investments and scout for candidates for acquisition.
Tata Power is the second private sector generator in the last few months that has shifted away from conventional power technologies and towards renewable energy technologies.
Earlier, Reliance Power, which operates one of the largest coal-based power plants in India, was reportedly planning to sell its coal mines in Indonesia. The company has been struggling to take several large-scale thermal power plants online. It was embroiled in a lengthy regulatory tussle for increasing the tariff of its Sasan-based ultra mega power plant. The company wants the tariff of the projects increased after prices of the coal it imports from Indonesia increased.
Tata Power itself has had a long regulatory battle to get the tariffs of its Mundra-based 4 GW coal-fired power plant revised, again on account of higher coal prices from Indonesia and appreciation of the US dollar against the Indian rupee.
Tata Power could possibly not have chosen a better time to field the new company. India’s conventional power sector is struggling with massive debts, both on the generator as well as the buyer side. Tariffs for renewable energy projects are increasing, while capital costs are falling, making them highly cost-competitive.
Tata Power’s announcement came only days after the government announced a rescue package for the power distribution companies which are struggling with $65.3 billion debt. The government has directed banks not to provide any additional funding to these companies.
The renewable energy sector, on the other hand, has received substantial support from the government. One of the most recent measures announced by the government was to remove taxes and charges levied on the inter-state transmission of power generated from renewable energy projects.
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