Canadian fund Brookfield Renewable Partners is in talks to invest up to $700 million in the renewable power investment trust (InvIT) of Tata Power Company Ltd (TPCL), India's oldest power producer, said two people close to the development. The company has started the process of separating books of renewable energy business to complete stake sale by end of this financial year.
"The deal negotiations are at the initial stage and there are about 3-4 foreign funds who have evinced interest in partnering in InvIT. Brookfield is likely to invest up to $600 million, besides one or two other partners," said a Mumbai-based investment banker.
Brookfield declined to comment, while TPCL didn't respond to the query. Earlier media reported that Malaysia's state-run oil and gas company, Petronas is looking to acquire around 10 per cent stake in Tata Power Renewable Energy Ltd (TPREL). The power major has also shortlisted Mubadala, KKR and Canadian pension fund CDPQ for negotiation. The company plans to sell 49 per cent stake in the InvIT to investors and retain the rest.
It looks to transfer about Rs 11,000 crore of debt, which is part of the renewable portfolio, along with the assets to the InvIT. Morgan Stanley Research values the 2,630 megawatts (MW) renewables portfolio of TPCL between Rs 18,500 crore and Rs 20,400 crore.
Tata Power targets to drastically cut its gross debt, launching infrastructure investment trust (InvIT) in the second half of this financial year. According to the estimates of experts, the company wants to reduce the debt by at least Rs 18,000-20,000 crore on its books through the process.
N Chandrasekaran, chairman, Tata group told the shareholders at the recent annual general meeting that the company would reduce its gross debt to Rs 25,000 crore from Rs 48,000 crore. He wants to achieve it through the sale of non-core assets, equity infusion from Tata Sons and formation InvIT and stake sale in it.
TPCL plans to increase the share of renewables in EBITDA to 50-60 per cent by FY25 from 30 per cent. Chandrasekaran said, "The company aims to be one of the leading players in renewables. The company will scale both its manufacturing of solar cells and modules as well as the solar EPC business. The company intends to add additional capacity of 10 gigawatts in the next five years."
TPCL has sold its stakes in Cennergi and shipping business for Rs 2,300 crore. The company targets another Rs 2,100 crore from sales of other non-core assets by March 2021. Moreover, the promoters Tata Sons has approved to infuse equity of Rs 2,600 crore in the company.
Chandrasekaran said TPCL will end FY21 with a debt of around Rs 25,000 crore, bringing down the debt to equity ratio to 1 from 1.99 in March. "This will also move the Net Debt to EBITDA ratio closer to 3, strengthening the balance sheet and lowering financing costs," he added.
The consolidated revenue of TPCL decreased by 3.5 per cent to Rs 28,948 crore in 2019-20. The profit before exceptional items stood at Rs 1,231 crore as against Rs 1,274 crore in the previous year. The major liability on the books is its ultra mega power plant in Mundra. The 4,000 MW plant, which was built at a cost of Rs 16,000 crore, is making losses for years because of low electricity price realisation.