Petronas eyes stake in Tata Power's InvIT

Mumbai: Malaysian state oil and gas company Petroliam Nasional Bhd (Petronas) is in active negotiations with the Tata Group to become a key investor in Tata Power‘s planned renewable energy infrastructure investment trust (InvIT) as India’s leading utility looks to unlock value and pare debt, said people aware of the matter.

Tata Power Renewable Energy Ltd (TPREL) is a wholly owned subsidiary of Tata Power Co. Ltd (Tata Power), India’s largest integrated utility company. Tata Power has been looking to raise $500-750 million for its clean energy platform and had initiated discussions with several investors, ETreported on February 9.

Approaches were made to several including KKR, Brookfield, Mubadala, Omers, German financial giant Allianz among many others, said the people in the know. Plans for an InvIT were floated last year, put on ice, then revived. Tatas are open to selling 51% of the InvIT to investors, added the sources mentioned above. If successful, Tata Power will join Larsen & Toubro, Reliance Industries, Sterlite and Piramal Enterprises in creating investment trusts for operational infrastructure assets. ICICI Securities and Citi are advising Tatas.

Talks with Petronas have progressed and the Malaysians are believed to be currently conducting due diligence. “There will be three-four investors in the InVIT,” said one of the persons. “Some of the multilateral agencies like UK’s CDC Group and IFC Washington and SWFs (sovereign wealth funds) have been bullish on the clean energy space and are expected to come on board as co-investors but are likely to contribute smaller cheques and remain as passive investors.” From Asian Development Bank to DEG, UK’s CDC, Proparco of France and IFC Washington, several multilateral agencies have been scouting for clean energy assets for investment opportunities. Petronas alone is expected to write cheques of around $200-250 million but the quantum is not yet finalised as negotiations are ongoing.

The Tata Group is looking at a $2.2-2.5 billion valuation for its 3.8 gigawatt solar and wind portfolio. It’s largely a solar portfolio, on account of its $1.4 billion acquisition of Welspun Energy’s assets in June 2016. As per the company’s presentation, another 700 MW of solar projects are under development in Uttar Pradesh, Maharashtra and Gujarat requiring a capital expenditure of Rs 3,000 crore. TPREL had debt of Rs 5,672 crore in the year ended March 2020, against Rs 4,210 crore in the previous year. TPREL’s reported Ebitda of Rs 200 crore in the March quarter was a jump of 24% from the year earlier and was supported by capacity addition of 315 MW.


The plan is to transfer the operational portfolio and debt to the InvIT. The pipeline assets will subsequently also get transferred to the platform, based on pre-agreed contractual obligations. The platform will further bulk up through acquisitions. On a consolidated basis, Tata Power’s debt stood at Rs 48,100 crore at the end of March, down marginally from Rs 48,506 crore a year ago. Tata Power didn’t respond to queries. A CDC spokesperson declined to comment, while mails sent to Petronas and IFC did not elicit any response till press time.

Petronas has been looking at apportioning 5% of its capital expenditure to renewable energy. In India, Petronas acquired Amplus in April 2019 from New York-based I Squared Capital. The company, which provides clean energy to its clients by setting up both on-site solar projects – rooftop and ground-mounted and off-site solar farms, owns and manages a portfolio of 650 MW of operational and underconstruction solar assets in India. In April, Tata Power completed the sale of its 50% stake in South African wind power company Cennergi to joint venture partner Exxaro Resources for Rs 660 crore. It is already in a pact to sell its stake in PT Arutmin Indonesia and is now in talks to sell its stake in its hydro asset in Zambia, smaller coal mines in Indonesia, wind assets in South Africa and its shipping business and divest its defence business.


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