Tata Power on Monday said it will buy Welspun Renewable Energy (WREPL) at an enterprise value of Rs 9,249 crore to boost its portfolio in renewable space and plans to fund the acquisition initially through low-cost debt.
Tata Power’s subsidiary Tata Power Renewable Energy (TPREL) has agreed to acquire WREPL, a Welspun Energy unit, through a share purchase agreement (SPA) at an enterprise value of Rs 9,249 crore, subject to closing adjustments.
“This was a strategic decision taken by the company as we intent to increase our renewable energy portfolio to 20,000 MW by 2025. We will be making the payment in two tier using our own leverage at Tata Power and then later will explore all options. The aim is to fund it through competitive ways like low-cost debt,” Tata Power CEO and Managing Director Anil Sardana told reporters here.
With the acquisition, the company will be able to maintain its current debt-equity level, which is at 2.8, even in this fiscal, he said.
Sardana said the company looked at two aspects while acquiring the assets of Welspun – the extra land available at the project sites and the declining prices of silicon.
“Almost all projects have extra land which in times to come could be exploited depending on the availability of substation and transmission capacity there. If they are implemented we will able to add panels and achieve extra generation without going through the full capital cost of setting up the infrastructure and acquiring land,” he said.
Sardana said since the projects are spread across 10 states, it will be a de-risk portfolio from the company’s perspective. Also, most of them are revenue generating and operating assets.
“In solar, our investment was limited. We were hopeful prices of silicon will drop and we did not want to sit on pile of assets,” he added.
WREPL has about 1,140 MW of renewable power projects comprising nearly 990 MW solar power projects and about 150 MW of wind power units.
Of the 1,140 MW renewable portfolio, nearly 1,000 MW of capacity is operational and the balance is under advanced stages of implementation.
TPREL operates 294 MW of renewable power capacity and 500 MW of renewable assets are being carved out of Tata Power into TPREL through a court process. In addition, almost 400 MW of solar and wind power projects are under implementation.
Thus, TPREL, with all these assets, would have renewable assets portfolio of about 2,300 MW, making it the largest renewable power company in India.