State-run NTPC has dropped plans to make Malaysian energy giant Petronas a strategic investor in its green energy unit ahead of its IPO.

NTPC Green Energy (NGEL) will go public through an initial public offering (IPO) this fiscal year and divest its 25% stake. The sale of shares to the public will be done through book building.

The state-run power company received government approval late last financial year to bring in a strategic investor for NGEL.

An official said that the country’s largest power producer mainly focuses on green energy businesses, has changed its strategy for funding NGEL because it does not see Petronas’ offer as attractive. NTPC has already divested 15 of its 2,861 MW of renewable energy assets.

Malaysian energy group Petroliam Nasional Berhad (Petronas) outbid Indian companies REC and Indraprastha Gas (IGL) for a 20% stake in NGEL last year, outbid Indian companies REC and Indraprastha Gas (IGL) for $460 million. But after NTPC started negotiating a better offer, it withdrew, the official said.

In addition, the government approved NTPC (a Maharatna) on March 17, 2023, to invest in NGEL beyond the prescribed limit, citing its aim to achieve the target of 60 GW of renewable energy capacity.

The official said NTPC would need a substantial stake to grow to 60 GW renewable energy capacity. However, he said the renewable energy market was opening up and growing fast, adding that NGEL’s public offering would likely offer better valuations.

In line with its commitments to COP 26, India is working towards a low-carbon path while meeting its development goals. It aims to reach 500 gigawatts of non-fossil energy capacity by 2030 as part of the country’s larger goal of achieving “net-zero” emissions by 2070.

Power Secretary Alok Kumar said earlier this month that the country needs to more than double its renewable energy production to meet its target of sourcing 90% of its energy from renewable sources by 2047. Coal currently accounts for 70% of India’s electricity output.

NTPC, India’s leading power utility, aims to add 60 GW of renewable energy capacity by 2032, half of its total installed capacity, out of a target of 130 GW. NTPC transferred its subsidiary NTPC Renewable Energy (NREL) to NGEL to strengthen its renewable energy portfolio.

NGEL and its subsidiary NREL aim to be the standard-bearers for NTPC’s renewable energy journey, involving green hydrogen, solar and wind.