Green Funding: BlackRock, Mubadala to invest in Tata Power Renewables

BlackRock, Mubadala to invest in Tata Power Renewables

Tata Power has signed a binding ag­ree­ment with a consortium comprising Black­Rock Real Assets and Mu­ba­dala Investment Company as co-in­ves­tors to rai­se Rs 40 billion for its renewable energy platform. This investment will be by way of equity or compulsorily convertible instru­me­n­ts for a 10.53 per cent sta­ke in Tata Po­wer Renewables, tra­nslating to a base eq­uity valuation of Rs 340 billion. The investment will be used to fund Tata Power Rene­wables’ growth plans in five distinct businesses focusing on consumer-oriented so­l­utions. The platform will house all the re­newable en­ergy busine­sses of Tata Power including utility-scale solar, wind and hybrid gene­ration assets; solar cell and module manufacturing; engineering, procurement and construction contracting; roof­top so­lar infrastructure; solar pumps and electric ve­hi­cle (EV) charging infrastructure. The deal reflects Tata Power’s pivotal position in the country’s clean energy transition as it see­ks to re­duce its de­pendence on fossil fuels.

Transaction contours

The proposal for raising Rs 40 billion th­rough Tata Power Renewable Energy Li­mited (TPREL), a wholly owned subsi­diary of Tata Power, was approved in a board meeting held in April 2022. TPREL will set up India’s most comprehensive renewable energy platform. An amount of Rs 40 billion will be invested by a consortium led by BlackRock Real Assets with Mubadala as co-investor at a equity base valuation of Rs 340 billion subject to adjustments based on the EBITDA for financial year 2022-23. The investment will be made in two tranches of Rs 20 billion each. Prior to the equity infusion, all businesses will be consolidated under TPREL th­rough the transfer of special purpose vehicles and certain as­sets to TPREL. Consequently, TPREL will become the hol­ding company for all the renewables businesses. The broad-based portfolio of as­sets ensures diversified yet stable reve­nue sources including 25-year fixed price po­wer purchase agreements (PPAs) for grid-connected utility-scale projects. All future renewable energy businesses will be de­veloped under this holding company. The structure will optimise cash up­streaming, capital deployment, leverage management and fundraising. The first tranche of Rs 20 billion equity will be infused post the transfer and ap­provals. The second tranche of Rs 20 billion thro­u­gh convertible securities will be infused wit­hin six months of the first infusion. The first round of investment is expected to be completed by June 2022 and the rest by the end of 2022. Approvals under the Com­petition Commission of In­dia as well as PPAs are being sought prior to this infusion. Post the infusion of both tranches, the equity stake of Black­Rock and Mubadala will be 9.76 per cent to 11.43 per cent, de­pe­nding on the EBITDA for financial year 2022-23. Moelis & Co­m­pany is the financial ad­viser to Tata Power for the deal, while JP Morgan is the financial adviser to Black­Ro­ck Real Ass­ets. Cyril Amarchand Mangal­das & Co. are the legal advisers to Tata Po­wer while Sl­au­ghter & May and AZB Part­n­e­­rs are the legal advisers to BlackRock Real Assets.

The way ahead

TPREL and its subsidiaries have an operational capacity of 3.3 GW as of Mar­ch 31, 2022, and a pipeline of 1.6 GW, which is at various stages of implementation. The com­pany has 1 GW of cell and module manufacturing capacity in Bengaluru, and has decided to set up another 4 GW of solar cell and module manufacturing ca­pacity. The company has also ins­talled the largest number of EV char­gers (over 15,000) across the country, covering home and fleet cus­­tomers as well as public ch­arging sta­tions. TPREL is targeting a portfolio of over 20 GW of renewable ass­ets over the next five years, and a market leading position in the rooftop and EV charging space across India. The setting up of the green platform and raising of fun­ds to adequately capitalise on it would enable the platform to scale up rapidly to become a leader in the renewable energy segment, the­re­by providing a wide spectrum of pro­ducts and services, and touching the bulk of the industrial, commercial and retail consumers. Further, the participation of globally reputed investors such as Black­Rock and Mubadala will foster trust and confidence in Tata Po­wer’s ability to deliver on its growth pla­ns. Going ah­ead, the se­tting up of the platform and consolidation of all green businesses under it will accelerate the journey towards a cleaner and greener company.