India’s largest integrated power company Tata Power Ltd will divest its entire holding to exit the seven-year investment in Cennergi (Pty) Ltd, a joint venture (JV) in South Africa with that country’s largest diversified group Exxaro Resources Ltd, the Tata group firm informed stock exchanges on Tuesday.
Tata Power, which is invested through its wholly-owned Khopoli Investments Ltd, has executed the share purchase agreement to sell its stake in the 50:50 JV. The stake sale, expected to conclude by December-end, will fetch about 1.55 billion South African rands ($106 million, or Rs 762 crore at current exchange rate) before accounting for normal working capital and other adjustments, it said.
Exxaro will acquire the entire 50% shareholding of Khopoli to have full ownership of Cennergi, which owns two wind farms in South Africa - Amakhala Emoyeni (capacity 134.4 megawatts or MW and 95% shareholding) and Tsitsikamma Community Wind Farm (95.3 MW and 75% shareholding). Each project has a 20-year power purchase agreement with the state power utility Eskom.
"The decision to monetise this South African asset is in line with our stated strategy to deleverage the balance sheet by divesting sub-optimal size international assets. The proceeds from such sale would be re-invested in emerging areas where there is a huge growth opportunity. The company will focus on renewable power, power distribution and service-led businesses in India, which will bring in greater value and help us align with emerging consumer needs,” said Tata Power chief executive and managing director Praveer Sinha.
Shares of Tata Power declined 0.54% on the BSE on Tuesday to quote at Rs 64. In contrast, BSE’s benchmark Sensex extended Monday’s 0.7% decline to fall an additional 1.8% on Tuesday.
ABSA Bank was the sole adviser to Tata Power on the deal.
Last year, Tata Steel — another Tata group company and he world’s tenth largest steel producer according to the World Steel Association – said it would sell its majority stake in an iron ore mine in South Africa to Switzerland’s IMR Metallurgical Resources AG for 366 million South African rands.
In January this year, Tata Steel also decided to sell a majority stake in its Southeast Asian businesses to a company controlled by China’s HBIS Group Co. Ltd for $327 million (Rs 2,326 crore).
However, the Indian steel major is looking for new investors as HBIS failed to get regulatory approvals from the Hebei government. Hebei is China’s top steelmaking province located in the northeastern region. Hebei had advanced the target dates for cutting industrial capacity and relocating plants by the end of October as it pledged to reduce air pollution, Reuters reported in July.
The company operates across the value chain in the power sector. It generates conventional as well as renewable power, is engaged in transmission and distribution, besides trading, and coal and freight logistics.
It has a total installed capacity of 10,957 MW. Tata Power’s wind and solar renewable energy assets account for 30% of its overall portfolio. It has tapped newer business areas in electric vehicle charging and storage, distributed generation and rooftops, microgrids, and home automation and smart meters as part of a strategy to provide integrated solutions.
In international geographies and markets, Tata Power’s strategic investments include ones in Indonesia, Singapore, Zambia, Georgia, Norway and Bhutan.