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Tata Power Renewable Energy (TREPL) has entered into a 100% share purchase agreement with Welspun Renewables to acquire the latter’s 1140 MW of renewable energy portfolio. Enterprise value (EV) of the deal works out to | 9250 crore or | 8.1 crore/MW. With the said acquisition TPREL would become the largest renewable energy company in India with ~2300 MW of renewable capacity post acquisition. Also, the consolidated portfolio of Tata Power would cross the 10000 MW mark. The acquisition is sync with the group philosophy of renewable portfolio being 30-40% of overall generation portfolio as this deal would inch the same metric to 28%. In our view, valuations appear on the higher side. EV/MW of | 8.1 crore/MW is higher than current replacement costs of | 6 crore/MW despite the fact the acquisition brings in quality operational assets, which have long term PPAs coupled with remunerative tariffs & associated infrastructure (land & T&D evacuation infra).
