India's Tata Power eyes more purchases in wind and solar push

Reuters

* Tata evaluating 370 MW worth of projects for purchase

* Renewables sector offers lower but safer margins: Tataofficial

* India aims to double renewable energy capacity by 2017

* Land acquisition, low tariffs still hurdles: Tata official

By Matthias Williams

NEW DELHI, Nov 26 (Reuters) - India's Tata Power is looking for more acquisitions as part of a$260-million-a-year investment push into renewable energy,following last month's purchase of a wind farm in westernGujarat from AES Corp, a senior official said.

Part of the tea-to-telecoms Tata group, the firm is India'sthird-largest listed utility by revenue in the Thomson ReutersIndia Index.

Primarily a thermal power utility, it is targeting rapidexpansion in renewables at home and overseas, aiming to addabout 150 to 200 megawatts (MW) of wind capacity and 30 to 50 MWof solar power every year.

Its newly acquired plant has a capacity of 39.2 MW.

"After we announced the Gujarat acquisition, we have got alot of interest from other owners of solar and wind operatingassets who want to exit their investment," said Rahul Shah, thechief of business development for India business and renewables.

"So are we are evaluating a lot of these opportunities," hetold Reuters in a telephone interview.

As coal and gas shortages and populist tariff regimes hobblethe performance of thermal power stations, renewable energyplayers such as Tata and Welspun Energy want to tap the sector'spotential in a growing but energy-starved economy.

But problems with acquiring land for projects, poorlyenforced government policies, and a race to the bottom inbidding for solar projects are a drag on renewables growth, saidShah.

The margins on renewable energy are lower, at around 12percent to 18 percent versus about 20 percent to 30 percent inthe thermal sector, Shah said. "But in renewable energy it is amore predictable performance and a predictable return," he said.

Although the firm will look to sell a stake in its renewablebusiness at some point, it has no timeline for this, Shah said.

The move could take the form of an initial public offering -although current market conditions are unfavourable - or a saleto a private investor, he added.

Tata operates about 400 MW of wind projects and 30 MW ofsolar. Shah said he hoped to buy more projects as soon as thisfiscal year, which ends in March, and is evaluating projectsworth a total of 370 MW for possible purchase.

India has targeted doubling its renewable energy capacity to55,000 MW by 2017, from nearly 27,000 at the start of this year.Renewables contribute about 12.5 percent of India's energy, the2012/13 report by the New and Renewable Energy Ministry shows.

Hurdles remain for the likes of Tata, Shah said. Forexample, rules stipulating that India's 28 states must source acertain part of their energy from renewables have not beenproperly enforced. Electricity tariffs paid by states can alsobe too low for companies to make money.

Other investors have echoed Tata's concerns. Welspun Energy,which is eyeing $1.6 billion of new investments by 2017, toldReuters in October that land acquisition and poor transmissionnetworks remained problematic.

JinkoSolar Holding, a China-based solar panel maker,told Reuters that low prices for solar products, cut-throatcompetition and high interest rates dragged on growth.

Shares of Tata Power were down 0.8 percent by 0956 GMT,versus a fall of one percent in the benchmark index.

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