A senior official of India’s Tata Power has said the company is looking for more acquisitions as part of a $260-million-a-year investment push into renewable energy.
The announcement follows last month’s purchase by Tata, one of India’s largest companies, of a wind farm in western Gujarat from AES Corporation.
Reuters Newsagency reports part of the tea-to-telecoms Tata group, the firm is India’s third-largest listed utility by revenue in the Thomson Reuters India Index.
Primarily a thermal power utility, it is targeting rapid expansion in renewable energy at home and overseas, aiming to add about 150 to 200 megawatts (MW) of wind capacity and 30MW to 50MW of solar power every year.
Its most recent acquisition has a capacity of 39.2MW.
“After we announced the Gujarat acquisition, we have got a lot of interest from other owners of solar and wind operating assets who want to exit their investment,” said Rahul Shah, the chief of business development for the company.
“So are we are evaluating a lot of these opportunities,” he told Reuters in a telephone interview.
Reuters reports renewable energy players such as Tata and Welspun Energy want to tap the sector’s potential in a growing but energy-starved economy.
This is especially so as coal and gas shortages and populist tariff regimes hobble the performance of thermal power stations,
However, problems with acquiring land for projects, poorly enforced government policies, and a race to the bottom in bidding for solar projects were a drag on renewable energy growth, said Mr Shah.
The margins on renewable energy are lower, at around 12 per cent to 18 pe cent versus about 20 per cent to 30 per cent in the thermal sector, Mr Shah said.
“But in renewable energy it is a more predictable performance and a predictable return,” he said.
Although the firm will look to sell a stake in its renewable business at some point, it has no timeline for this, Mr Shah said.
The move could take the form of an initial public offering, although current market conditions are unfavourable, or a sale to a private investor, he added.
Tata operates about 400MW of wind projects and 30MW of solar.
Mr Shah said he hoped to buy more projects as soon as this fiscal year, which ends in March, and is evaluating projects worth a total of 370MW for possible purchase.
Reuters reports India has targeted doubling its renewable energy capacity to 55,000MW by 2017, from nearly 27,000MW at the start of this year.
Renewable energy contributes about 12.5 per cent of India’s energy, the 2012/13 report by the New and Renewable Energy Ministry shows.
Hurdles remain for the likes of Tata, Mr Shah said.
For example, rules stipulating that India’s 28 states must source a certain part of their energy from renewable energy have not been properly enforced.
Electricity tariffs paid by states can also be too low for companies to make money.
Other investors have echoed Tata’s concerns, and Welspun Energy, which is eyeing $1.6 billion of new investments by 2017, told Reuters in October that land acquisition and poor transmission networks remained problematic.
JinkoSolar, a China-based solar panel maker, told Reuters that low prices for solar products, cut-throat competition and high interest rates dragged on growth.
