The biggest green fighter on Wall Street may soon be teaming up with one of India’s most trusted conglomerates. BlackRock chairman and CEO Larry Fink is approaching a $500-750 million (₹3,750-5,625 crore) investment in Renewable Energy Ltd (TPREL), those in the know said. That values the subsidiary of publicly traded Tata Power at about $5 billion (about ₹35,000 crore), people in the know about the development said. Fink was one of the early champions of investment in climate change and sustainability; BlackRock is the world’s largest asset manager.
ET was the first to report on Sept. 22 that Tata Power was relaunching capital-raising plans and instructing investment bank Moelis, nearly six months after it pulled out of talks with Malaysian state-owned company Petronas for a potential investment of $2 billion.
Due Diligence on
Canadian pension fund CPPIB was another potential investor evaluating the investment opportunity. But BlackRock’s hefty valuation of the company, backed by a $1 billion investment by TPG Rise in Tata Motors’ electric car business, has made it a stronger contender to be the top anchor investor, according to the people quoted above. .
The due diligence was initiated after the initial screening of potential investors. The company hopes to complete the negotiations before the end of December. Depending on investor interest, the company could increase its capital raising plans to $1 billion with multiple smaller co-investors.
As with the private equity group, BlackRock has dedicated capital pools for investments in clean technology and green energy. BlackRock’s third global renewable energy fund raised $4.8 billion — nearly double its original target — to invest in assets around the world, attracting money from more than 100 institutional investors, it said in April. . Tata Power declined to comment. Tata Sons and BlackRock did not respond to questions.
Unlike the previous attempt to create an infrastructure investment trust composed of the generating green assets, this time funds are being raised for an entity that groups the entire renewable energy portfolio. This entity includes operational and pipeline independent power generators (IPP), charging stations, rooftop solar, microgrids, panel manufacturing, engineering, procurement and construction (EPC). For example, Tata Power Solar is a 100% wholly owned subsidiary of TPREL.
Experts also see this as a potential exercise for value unlocking and valuation benchmarking prior to listing.
Tata Power, the country’s largest integrated energy company, has announced a plan to phase out coal-based capacity and expand clean and green capacity to 80% by FY30. Renewable energy comprises almost a third of the total power of 13 GW. Management hopes to increase this share exponentially to 80% by 2030, according to management’s commentary, to improve its environmental, social and governance (ESG) ratings and increase its appeal to foreign investors. Since January, it has received or received letters of intent for solar energy projects with a capacity of more than 1 GW. “The company has the potential to become India’s NextEra Energy as it skilfully spans across stable distribution and fast-growing renewable businesses,” said Apoorva Bahadur of Investec.
Analysts said the company is increasingly looking at a holistic strategy for the entire clean energy spectrum, such as solar module manufacturing, solar pumps and electric vehicle charging, which offers growth opportunities and helps position it as an integrated player in the field. of renewable energy. Investors have endorsed the shift – Tata Power stock is up 125% in the past six months, while the BSE Power index is up 36.5% over the same period.
One of the key growth strategies is to focus on sunrise areas that are less capital intensive but gaining momentum, such as EPC and solar pumps, transmission and distribution, and the sustainable business value chain. In addition, the company is gradually moving in the business-to-consumer (B2C) value chain through, among other things, charging stations for electric vehicles and home automation. In the solar field, for example, Tata Power has built a presence across the entire value chain – module and cell manufacturing, EPC, and operations and maintenance (O&M) – for competitive advantage. The company also has a presence in emerging battery storage technology, winning the tender in August for the country’s first large-scale battery storage project in Ladakh, with a rated capacity of 50 MWh.
Tata Power is also one of the leaders in hybrid solar wind energy and the market leader in solar roofs. In April, Tata Power Solar doubled production capacity at its Bengaluru plant to 1.1 GW, and has attempted to take advantage of the government’s Rs 4,500 crore production-linked incentive (PLI) plan for solar panels. It submitted a bid to expand its cell and module production capacity to 4 GW, if government initiatives come through. For its EV game, Tata Power leverages the entire group to manage network access, billing, time of day (TOD) rates, and others. While the market is still evolving, the aggregate size of the opportunity could reach $3-5 billion over the next seven to eight years, assuming 30% penetration, industry players believe.
This pivot has coincided with the overall increase in clean energy driven by a combination of the decline in capital costs, technological advancement and political commitment to climate change, making it the preferred choice for incremental capacity globally.
The balance sheet has also largely recovered with restructuring and divestments, analysts said, further boosting the stock. Net debt stood at Rs 39,719 crore at the end of September, of which Rs 13,733 crore was accounted for by renewable energy. Parent company Tata Sons also invested $350 million in the company. Last week, the company posted a 36% increase in consolidated net profit for the September quarter on the back of higher revenues. “Tata Power (TPCL) Q2 results show strong traction on clean energy companies and an edge with leadership status,” said Swarnim Maheshwari of Edelweiss.
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