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Energy

India's top power generator boosts renewables with acquisitions

NTPC buys government stake in two power companies

NTPC has set an aggressive target of setting up 10 GW of renewable portfolio by 2022.

MUMBAI (NewsRise) -- NTPC's acquisition of government's stake in THDC India and North Eastern Electric Power Corp. will help India's largest power-generation utility boost its renewable energy fuel mix and curb the dominance of coal, analysts said.

The state-run power generator signed pacts with federal government on Thursday to acquire New Delhi's entire stake in the two companies for a total of 115 billion rupees ($1.52 billion) in cash.

The acquisition is part of the federal government's push to raise cash through sale of state-owned assets to meet its disinvestment target of 650 billion rupees by the end of this fiscal year. The government has so far garnered 348.45 billion rupees so far in the financial ending Mar. 31.

NTPC, which has 53.6 Gigawatts of installed capacity, has set an aggressive target of setting up 10 GW of renewable portfolio by 2022. The company is planning to expand its generation portfolio to 130 GW by 2032, with 37% contribution from non-fossil fuel-based capacity.

Analysts say the acquisition of NEEPCO and THDC will help NTPC diversify its thermal-based portfolio, as renewable generation capacity accounts for barely 10% now. After the merger, the company's hydropower capacity will be 3.1 GW, or 5% of the total consolidated portfolio.

The acquisitions are "neat strategic fits in NTPC's renewable aspirations," Edelweiss Securities said in a report on Friday. It would provide NTPC a toehold in renewable sector with 5 GW of capacity, of which 3 GW are operational, thereby allowing it to skirt the low return on equity in the solar and wind capital expenditure, the brokerage said.

India, the world's largest emitter of green-house gases, has been pushing its power generators to add renewable energy to its electricity grid to curb the pollution enveloping major cities, as well as curtail the dependence on coal. The south Asian country aims to have 500 GW of clean energy capacity by 2030 and 175 GW by 2022.

However, the goal has come under threat because of the under-recoveries from distribution companies and tepid investor interest in Indian renewable sector.

Last year, NTPC said it plans to set up a 5 GW solar park in the western Indian state of Gujarat at an expected project cost of nearly $3.3 billion.

While the acquisitions are 10% costlier than expectation, it is still "value-accretive," Edelweiss said.

"With no more divestment risks overhanging the company and the stock's attractive valuation," the brokerage retained its Buy rating on the stock.

Shares of NTPC rose 3.2% in Mumbai trading on Friday, while the benchmark S&P BSE Sensex lost 0.4%.

--Dhanya Ann Thoppil

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