Tata Power to set up renewable energy InvIT, divest non-core assets
Photo Credit: Reuters

Tata Power Co. Ltd plans to set up an infrastructure investment trust (InvIT) for its renewable energy assets and look for investors as part of a broader plan that also involves selling non-core units to slash debt.

The company said in a statement on Thursday its board has given in-principle approval to establish an InvIT on the “terms and conditions to be discussed with potential investors”.

The Tata Group’s power generation and distribution arm didn’t specify who those investors might be or what the timeline was for setting up the InvIT.

Tata Power also didn’t say how much of the company’s operational capacities will be taken over by the InvIT or whether the proposed trust will be listed on the stock exchanges.

A query emailed to a company spokesperson remained unanswered till the time of filing this article.

Media reports have previously said that Malaysia’s Petronas, Dutch pension fund APG, Canada’s Brookfield Asset Management Inc. and Abu Dhabi’s Mubadala Investment Company were looking to invest in Tata Power’s InvIT.

Tata Power has a portfolio of 1,705 MW of solar and 932 MW of wind-generation capacity spread across 10 states. It also makes solar modules and pumps, and develops solar rooftop projects.

The company also said that, apart from setting up the InvIT, it plans to sell some non-core assets and overseas investments as part of the plan to cut debt and strengthen its balance sheet. It didn’t identify those assets.

Besides, it will raise Rs 2,600 crore from parent Tata Sons Pvt. Ltd by allotting shares on a preferential basis. These shares will be allotted at Rs 53 apiece, a 15% premium to Wednesday’s closing price.

Tata Sons’ stake in the power company will increase from 35.27% to 45.21% after the share issue. Consequently, Tata Group’s stake will increase from 37.22% to 46.86%.

Tata Power’s planned InvIT will be the second such investment vehicle in India’s renewable energy sector. Last year, billionaire Ajay Piramal-led Piramal Enterprises Ltd and Canada Pension Plan Investment Board (CPPIB) signed an initial pact to co-sponsor a renewable energy-focussed InvIT with an initial corpus of $600 million.

India has only three publicly listed InvITs. These are KKR- and GIC-backed IndiGrid, which was sponsored by Sterlite Power Grid Ventures; IRB InvIT Fund, sponsored by IRB Infrastructure Developers; and IndInfravit Trust (sponsored by L&T Infrastructure Development Projects Ltd.

IndiGrid exclusively buys operational power transmission assets while IRB InvIT and IndInfravit hold road assets.

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