IOC forays into solar power
New Delhi   05-Sep-2011

To de-risk its balance sheet from rising under-recoveries in the long term, IndianOil (IOC) has forayed into solar power. The maharatna firm had earlier entered wind and nuclear power generation.

IOC will set up a 5 mw solar photovoltaic plant near Jodhpur in Rajasthan, AMK Sinha, director (planning and business development), told Financial Chronicle. The contract has been awarded to Bharat Heavy Electricals (Bhel), he added.

IOC’s strategy is to diversify its portfolio across the hydrocarbon chain. “We want to be among the top three players in every business,” Sinha said.

“There is a close link between oil and gas and renewable energy, as these are part of the same hydrocarbon chain,” said Arvind Mahajan, executive director and head of energy and natural resources at KPMG.

“Non-conventional sources of energy will not replace conventional sources immediately, but these will be important in the long run. So, companies need to build capabilities for the future,” Mahajan said.

IOC’s losses widened to Rs 3,719 crore in first quarter of this financial year, mainly due to not receiving subsidy on time.

“All these (solar and wind power) are at a very nascent stage. These portfolios would not contribute much to a company's bottom line. In a very long-term perspective for next 20 years, non-conventional energy would be a major source of energy,” said Alok Deshpande, a research analyst at Mumbai-based Elara Securities (India).

At present, IOC has debt in the order of Rs 70,000-71,000 crore, PK Goyal, director (finance), told Financial Chronicle. The company is yet to receive Rs 8,200 crore of government compensation.