Tata Power is set to significantly increase its spending on renewable energy (RE) for the fiscal year 2025, despite recent discussions about potential thermal projects. The company plans to allocate Rs 20,000 crore in capital expenditure for FY25, with 60% directed towards renewable energy, 30% for transmission infrastructure, and the remaining 10% for new ventures such as pumped hydro storage.
As of the first quarter of FY25, Tata Power has an installed renewable energy capacity of 6.1 GW, which constitutes 41% of its total capacity, with an additional 5.3 GW under development. The company aims to expand its renewable portfolio to over 11 GW, representing 56% of its total capacity, within the next 12 to 24 months.
According to Ambit Capital, Tata Power is expected to see its annual capital expenditure increase to three to four times its previous decade’s levels, driven largely by investments in renewable energy and storage solutions. Despite a projected annual capex of over Rs 12,000 crore, the company’s net-debt to EBITDA ratio is anticipated to remain at three times through FY30.
This implies that while Tata Power will incur new debt for renewable projects, it plans to use its cash flows to reduce existing core and non-core debts, including those related to the Mundra plant and Welspun Renewable Energy (WREL).
Analysts at JM Financial predict a substantial growth in Tata Power’s renewable energy business, estimating a revenue increase of over 25% CAGR from FY22 to FY25. Following this period, they expect further performance improvements driven by transmission projects and additional generation capacities, including hydro and pumped hydro energy.
In Q1 FY25, Tata Power’s renewable energy segment reported an EBITDA of Rs 903 crore, up from Rs 844 crore the previous year, while net profit was slightly down at Rs 229 crore compared to Rs 235 crore in Q1 FY24. The company has a pipeline of over 5 GW in renewable projects, including 2.6 GW in utility-scale solar EPC, which is expected to meet its FY25 targets.
However, project commissioning is currently facing delays due to transmission connectivity constraints. Tata Power is focusing on meeting its contractual obligations and sees significant potential in rooftop solar, which is expected to make a meaningful contribution later in FY25.
