Tata Power's Big Bet on Green Energy Just Got Bigger

Tata Power recently announced a massive investment of Rs 750 bn towards renewable energy at its latest annual general meeting.

As India prepares to leap forward in developing its renewable energy sources, the company is equipping itself every step of the way.

Here are the details.

Tata Power's 750 bn Renewable Energy Push

Tata Power aims to double its total capacity from 13.5 gigawatts (GW) in 2022 to over 30 GW by 2027. It plans to invest over Rs 750 bn in the next five years.

This expansion will boost its renewable energy portfolio from 34% to 60% by 2027 and 80% by 2030.

But Tata Power is not alone.

Private players like Adani and Reliance along with Government held NTPC are also ramping up their renewable capacity.

While Adani Green Energy is developing a renewable portfolio of 25 GW by 2025, Reliance aims to set up a 100GW renewable energy capacity by 2030.

Tata Power also aspires to become an ESG (Environmental, Social, and Governance) benchmark in the power sector. The company has outlined three key goals including becoming carbon net-zero by 2045, 100% water neutral by 2030 and zero waste to the landfill before 2030.

Apart from this, the company is equally focused on growing its consumer-centric and new-age energy solutions business segment.

This includes solar rooftops, EV chargers, solar pumps, smart metering and energy management solutions.

Tata Power leads the electric vehicle charging station pack with over 1,300 charging stations under its umbrella.

Aiming to create a large dedicated electric vehicle battery charging infrastructure, the company plans to become the leader with over 1 lakh chargers installed by 2026.

The company is also setting up a 4GW solar cell and module manufacturing capacity in Tamil Nadu with an investment of Rs 30 bn.

It enjoys a healthy solar EPC (Engineering, Procurement, and Construction) order book of Rs 130 bn. With the solar sector projected to grow by 10x over the next five years, this segment can become a predominant source of revenue for the company.

How will the company fund these expansions?

Currently, Tata Power enjoys a comfortable debt position to support its growth, with a net debt to equity of 1.5x.

However, the current interest coverage ratio stands low at 1.6x.

But considering the company is a part of the cash-rich Tata group, funding this new era of growth should not be a concern. The company can either raise more debt or sell more equity to investors across the globe.

Earlier this year, Tata Power sold a 10.5% stake in its new energy business to Blackrock and Mubadala for a combined value of Rs 40 bn, indicating global interest in India renewables.

To conclude,

Tata power's ambitious plans highlight the company's eagerness to lead the explosive renewable energy segment.

The company's renewable business spans five verticals with strong visibility for growth. Moreover, all the businesses will be housed under one umbrella, helping optimize capital raising and deployment.

While sustainable growth is not an issue, lingering concerns over how the company will scale its business remain.

It faces tough competition from Reliance Industries and Adani and government-funded utilities such as NTPC.

How these capex plans pan out remain to be seen. Meanwhile stay tuned for more updates from this space.

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