BlackRock looks to power Tata Power's green business
- In Reports
- 07:02 PM, Nov 03, 2021
- Myind Staff
An Indian conglomerate and Wall Street's biggest green warrior might develop a partnership soon. Larry Fink, the chairman and CEO of BlackRock, is close to investing $500 million to 750 million rupees (3,750 to 5,625 crores) in Tata Power Renewable Energy Ltd (TPREL), according to sources familiar with the matter.
People aware of the development estimate that the subsidiary of listed Tata Power will be valued at around $5 billion (around 35,000 crore). BlackRock is the largest asset manager in the world, and Fink was among the first to champion climate change and sustainability-linked investments.
Sources reported on September 22, about Tata Power restarting capital-raising plans, mandating investment bank Moelis, nearly six months after pulling out of talks with Malaysian state-owned energy giant Petronas for a potential $2 billion investment.
Another potential investor, the Canadian pension fund CPPIB, analyzed the investment opportunity. Despite this, BlackRock's chunky valuation of the business - boosted by TPG Rise's investment of $1 billion in Tata Motors' electric vehicle business - has made it a stronger contender to be the main anchor investor, said the people cited above.
Initial screening of investors has led to the start of due diligence. Negotiations are expected to conclude by the end of December. Investor appetite may determine the company's capital-raising plan, which may reach $1 billion with multiple smaller co-investors.
BlackRock, like private equity firms, has dedicated pools of capital for clean tech and green energy investments. Over 100 institutional investors contributed to BlackRock's third global renewable power fund, which raised $4.8 billion, almost double its initial target. Tata power have stayed silent on the matter.
As opposed to the previous attempt to create an infrastructure investment trust that included generating green assets, funds are being raised for a venture that would group the entire renewable energy portfolio. It will include operating and pipeline independent power producers (IPP) assets, charging stations, rooftop solar, microgrids, panel manufacturing, and engineering, procurement, and construction (EPC). Tata Power Solar, for example, is a wholly owned subsidiary of TPREL.
Experts see this as an opportunity to unlock value and to benchmark valuation before a possible listing.
Tata Power, the country's largest integrated power company, plans to phase out coal-burning capacity and expand clean and green capacity to 80% by FY30. Its total power capacity of 13 GW comes almost entirely from renewable sources.
The management hopes to achieve 80% of this share by 2030, according to its commentary, to improve its environmental, social and governance (ESG) ratings and attract overseas investors. It has commissioned or received letters of intent for solar projects with over 1 GW of capacity since January. "The company has the potential to be India's NextEra Energy, as it expertly straddles stable distribution and high growth renewable businesses," said Apoorva Bahadur of Investec.
Image source- Asia Financial
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