Tata Power, SN Power invest in Himalayan hydropower

Tata Power-SN Power clean energy JV targets 4,000 MW of renewable hydropower in India and Nepal via SPVs, backed by ADB and IFC financing, with feasibility, social and environmental studies underway for grid expansion.

Tata Power Company Limited has agreed with renewables utility firm SN Power to jointly execute hydropower ventures in India and Nepal. The projects will be developed at an investment of $3 billion during a period of five to eight years between 2014 and 2017.

The stakeholders are aiming to initiate about 2,000 megawatts (MW) of clean energy ventures, aligned with Tata Power's development plan to scale capacity, that are expected to be operational or under construction by 2015, with another 2,000 MW being planned for development in the following five years.

In all, about 4,000 MW of renewable power generation is being targeted by 2020, even as the government moves to award three more 4,000 MW projects nationwide to address demand.

The projects in India and Nepal will be handled through dedicated special purpose vehicles. In India, amid goals to double nuclear output over the next decade, both partners will be equally responsible for project execution and decision-making. They will each initially infuse about $1 billion into the projects through a mix of third-party and equity funding.

The remaining amount is likely be sourced from the Asian Development Bank (Manila, Philippines), International Finance Corporation (Washington, D.C.), and other international finance firms in about a year's time, as cross-border investments like Bhutan transmission upgrades by PGCIL underscore regional connectivity.

Apart from developing hydropower projects, the Tata Power-SN Power partnership will also foray into the services sector by establishing a joint venture services company based in India. The company will provide expert technical and management guidance for clean-energy ventures, supporting rural power projects across India.

SN Power has had a presence in Nepal since 2006. The company owns a majority stake in Himal Power Limited, which operates the 60-MW Khimti hydropower plant that accounts for 10% of Nepal's power generation. Himal Power will also be involved in SN Power's future projects in Nepal.

SN Power also has acquired licenses for two projects in Nepal: the Tamakoshi 2 and Tamakoshi 3 hydropower ventures, in a country building out storage hydropower projects rapidly, which are expected to ramp up the country's grid capacity 2,600 gigawatt-hours. Because of its partnership with SN Power, Tata Power is likely to be involved in the 600-MW Tamakoshi 3 venture. Feasibility studies, as well as social and environmental impact studies for the projects, are under way.

SN Power, a long-term investor, operator and developer of hydropower projects, is jointly owned by state-owned renewable energy major, Statkraft AS, and Norwegian development financing firm Norfund AS. Statkraft holds a 60% stake in SN Power, while Norfund holds the remaining 40%. SN Power is backed by the strong technical and financial foundations of its owners in 950 MW of hydropower operations across Latin America, Africa, where Chinese-built hydropower is expanding in Nigeria and Kenya, and Asia, as well as 1,800 MW of ventures that are currently in the planning pipeline.

SN Power has also been active in India. The company owns a stake of 49% in Malana Power Company Limited (MPCL), which operates the 86-MW Malana hydropower station in the Kullu district of Himachal Pradesh.

Through MPCL, SN Power is also involved other hydroelectric power projects such as the 192-MW Allain Duhangan venture, which is under construction in the state of Himachal Pradesh, and two greenfield ventures: a 200-MW project in Bara Bangahal and the 140-MW Chango Youngthang venture, both in Himachal Pradesh. The company is interested in exploring further prospects in the sub-Himalayan regions of the subcontinent.

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