Renewable energy business is a high-growth area in India, though falling asset prices and competitive bidding for new power purchase agreements may lead to volatility in returns on investments, S&P Global Ratings said today.
“We believe the renewable energy business is a high-growth area in India, given the governments focus on increasing capacities for renewable energy and priority dispatch,” it said in a statement.
However, falling asset prices and competitive bidding for new power purchase agreements (PPAs) can expose renewable energy assets to volatility of returns on investments, it said.
It added that such assets also face greater volatility of cash flows due to seasonality and inherent uncertainty of wind/hydro/solar patterns, resulting in resource risks.
The agency further said that Tata Powers business position is unlikely to materially change after the acquisition of Welspun Renewable Energy.
S&P Global Ratings further said that its corporate credit rating on Tata Power Ltd (B+/Stable) is not immediately affected by the company’s acquisition of Welspun Renewable Energy for an enterprise value of Rs 92.49 billion.
Tata Power indicated that it intends to maintain leverage at the current improved levels post-acquisition through strategic measures.