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Tata Power Eyes $1.45 Billion Buyout Of Welspun Renewables

One of India’s largest private sector power generation companies, Tata Power, looks set to undertake the country’s biggest renewable energy acquisition.

According to media reports, Tata Power is set to acquire Welspun Renewables, a subsidiary of the Welspun Group, for a record $1.45 billion.

If the transaction goes through, Tata Power will acquire 1,152 MW of wind and solar power capacity. This includes 685 MW of operational solar and wind energy capacity, 200 MW of capacity set to be commissioned by June’s end and another 257 MW in capacity likely to come online by Q4 2016.

The operational capacity also includes the largest solar power project in India, a 151 MW solar PV power plant in Madhya Pradesh. GE Energy Financial Services holds a stake in the project.

Welspun Renewables is part of the Welspun Group, which primarily operates in the fabric manufacturing sector in India. The group has diversified into the renewable energy sector while the sector itself was very young in India and feed-tariffs were very high.

Over the last 2-3 years, however, competition in the solar power market has increased tremendously, with tariff bids falling from around Rs 18/kWh (US¢27/kWh) in 2010 to less than Rs 4.50/kWh (US¢6.8/kWh) in 2016.

It only makes sense for a company whose core business is not renewable energy to sell assets in such a competitive market and focus on its core business. It would be difficult for Welspun Renewables to expand further in the presence of global players like SunEdison and SkyPower Global, which have led the sharp correction in solar power tariffs. 

Tata Power, on the other hand, is looking to move towards renewable energy after some unfavorable experiences in the fossil fuel-based power generation sector. The company recently increased its own target for share of renewable energy-based installed capacity from 20% to 35-40% by 2025.

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