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Vedanta unit Hindustan Zinc plans to sell wind energy assets

23 September, 2016

In a sign of growing consolidation in the Indian clean energy space, Hindustan Zinc Ltd (HZL), a subsidiary of Vedanta Resources Plc, is exploring the sale of its wind power projects and has appointed IDFC Ltd to carry out the mandate.

“HZL has a wind power capacity of 273.5 megawatt (MW) and has mandated IDFC to run the sale process,” said a person aware of the development requesting anonymity.

Vedanta Resources holds a 64.9% stake in HZL which registered a net profit of Rs.8,167 crore in 2015-16.

The sale process for the projects spread across Rajasthan, Gujarat, Karnataka, Maharashtra and Tamil Nadu has been in the works for some time now. These wind power projects have an average tariff of around Rs.3.90 per unit. 

According to information available on HZL website, the wind power assets generated 148 million units of electricity in the first quarter of the current financial year, a 17% increase compared with 127 million units in the corresponding period last year. However, the Vedanta subsidiary registered a 7% fall in wind power generation in 2015-16 with 415 million units compared with 444 million units generated in 2014-2015.

While an IDFC spokesperson didn’t respond to queries emailed on 21 September, a HZL spokesperson in a text message said, the “Company declines of any such developments”.

The Indian renewable energy deal space has been active with Azure Power’s plan to sell stakes in its operational projects and Greenko Energy Holdings acquiring SunEdison Inc. India portfolio. Also, Partners Group AG looking to acquire stake in Continuum Energy. 

Of India’s installed power generation capacity of 304,761 megawatt (MW), coal forms the mainstay of the fuel mix with a 61% share or 186,293MW. Renewable sources contribute 44,237MW to the installed base.

This is expected to change with the Narendra Modi-led National Democratic Alliance government setting a target of 175 gigawatt (GW) of renewable energy projects by 2022. Of this, 100GW is expected to be in the solar power domain with 60GW coming from wind power projects. India has an installed capacity of 26.8GW of wind and 7.6GW of solar power at present. 

Experts believe that wind power faces some challenges vis-a-vis solar.

“Wind power generation is highly seasonal where 70% of the generation takes place between April and September. Moreover, acquiring land for wind is a challenge compared with solar which can be installed in patches. Also, wind power is costlier compared with solar and conventional sources,” said Kartik Shetty, analyst at India Ratings and Research Pvt. Ltd.

“Furthermore, tariff for wind is higher than that of solar and conventional power. The average time for installing wind project is higher at 12-15 months compared with 4-8 months in solar,” Shetty added.

This comes at a time when investments in green energy sources, electricity networks and energy efficiency have been robust. According to International Energy Agency, of the $2 trillion global energy investments in 2014, renewable energy investments accounted for $313 billion. 

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Vedanta unit Hindustan Zinc plans to sell wind energy assets

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