One of India’s leading private sector power companies is the latest to reportedly consider setting up a yieldco.
Power generation company Tata Power is reportedly considering setting up a yieldco for the operational renewable energy projects of the company. Tata Power is India’s largest integrated power company and part of the massive industrial conglomerate the Tata Group. The company has multiple subsidiaries including Tata Power Solar and Tata Power Renewable Energy.
Tata Power could pool its operational solar and wind energy projects that are currently owned by its renewable energy subsidiaries to raise funds. The company would use these funds to retire outstanding debt worth almost US$7 billion.
The company is reported to have an operational renewable energy capacity of 2.5 gigawatts with an additional 400-500 megawatts of capacity under development. The operational capacity includes the 1.1 gigawatt of capacity Tata Power acquired from Welspun Energy for US$1.4 billion in 2016.
The reported decision to go for a yieldco (infrastructure investment trust, in the Indian context) by a company like Tata Power shows the strains that the renewable energy developers are facing to raise fresh funds and service their or associated companies’ outstanding debt.
Tata Power Renewable Energy was established in late 2015 when the parent company decided to shift all renewable energy assets into a separate company. There were media reports at that time that the company may eventually be listed at Indian bourses through an initial public offering, or IPO.
The company may thus join its competitors like ReNew Power, Acme Solar Holdings, and Mytrah Energy to consider yieldcos. All these companies have bid for large-scale solar and wind energy projects for raising debt due to the persistent liquidity crunch surrounding several Indian corporates. ReNew Power and Acme Solar Holdings had filed papers with the Indian regulators to launch IPOs but are now reported to have dropped those plans.
While the idea of yieldcos in the Indian renewable energy market has emerged due to desperate conditions of the developers, it may attract investors as renewable energy remains a policy priority for the government.