“In Tata Power’s proposed trust for investments in renewable energy infrastructure, the Tata group has terminated its $2-billion investment deal with Malaysian State-owned oil and gas firm Petroliam Nasional Bhd (Petronas)”, said Praveer Sinha, Managing Director of Tata Power. “The decision was made last week to pull out this advanced phase after the two parties were negotiating a binding mandate sheet during the final phase”, he added. The conglomerate in India has returned to its drawing board to explore the IPO, in order to capitalize on the limited investment interest in public and private markets in green power companies worldwide. Tata Power is likely to build an umbrella entity to accommodate its IPP operational and pipeline projects together with its microgrid, top solar panels, and EV charging stations as part of its listing plans.
“The wholly-owned Tata Power Renewable Energy Ltd (TPREL) subsidiaries, Tata Power Co. Ltd (TPCL), the largest Indian integrated utility company, has initiated the strategic move to raise the value-added net debt from Rs 35,363 crore to Rs 25,000 croreto raise USD 500-750 million for its clean energy platform. In its June 5 edition last year, ET reported Petronas’ participation as a major anchor investor in India’s clean power plant in discussions with Tatas. The advisers on the deal were Citi and ICICI Securities”, said Praveer Sinha.
“During protracted talks, a multiannual phased investment plan was finally concluded between two sides at the end of the year, and Rs 3500-Rs 3,800 (USD 466 – USD 500million) was agreed upon for Petronas, for a stake of nearly 30–35 percent of the InvIT at a value of USD 2.5 billion. This trust would only house 2.6 GW of wind and solar parks, which were operational and developed, but would have the option to grow. The energy giant committed an additional USD 1.5 billion to a project pipeline over a certain three- to five-year time frame” said Praveer Sinha, “the sudden U-turn surprised many group observers. In the last 1 year, the Tata Power stock in the forecast for this transaction increased 285 percent (almost 3 times). A clutch of other financial and institutional investors would be included in a consortium following Petronas”, he added.
“Tata Power was confident that InvIT would monetize the assets. The board also blessed the InvIT plans last year, which were later sought by SEBI, to give us the necessary capital for investment in growth and substantially reduce our debt”, said Praveer Sinha. “It became clear at that point that the board was hesitant to continue as better assessments could be made by an IPO. Renew Power SPAC’s growth on the Adani Green stock truly has made everyone happy to tap into capital markets”, stated Sinha.
“The InviT was the first step towards a mega transformation in TPCL, largely obstructed by a bloated balance sheet up until now. Departmental measures and the promoter’s infusion have helped to reduce the debt. There is scope for further advantage from favored InvIT valuations”, said Aniket Mittal, Analyst atMotilal Oswal.
“Management plans to remove more than 1 billion dollars of net debt have been highlighted, with the advent of the Renewable InvIT, which would knock off USD 1.8bn debt. We argue that Street has not survived its past, but is primed for sustainable and clean growth, while it is fixed on traditional problems and accordingly valued TPCL. We take up and position new renewable energy opportunities (USD 87bn) for TPCL, distribution and EV”, said Swarnim Maheshwari, Analyst at Edelweiss.
Analysts believe that Adani Green’s footprint in comparison to Tatas is far greater and more ambitious. There is a capacity of 4.07 GW in Tata Power Renewables, 2.6 GW of which is operational, and another 1.3GW in place. Because it acquired USD1.4 billion of Welspun Energy’s assets in June 2016, it is largely a solar portfolio. Tata Power’s total power generation capacity represents 30% of its clean power portfolio. By 2025, Tatas target 15 GW from clean electricity sources. In comparison, Adani Green is looking for 25 GW in the same period with its French partner, Total.
