Tata Power Company [Get Quote] Limited, the largest domestic private sector power producer, has forayed into the geothermal energy sector by acquiring 10 per cent stake in Australia's Geodynamics for $37 million (about Rs 165 crore).

TPC would get a board representation in Geodynamics Ltd, a listed company in Australia with a market capitalisation of Australian $350 million. Both companies would also jointly explore geothermal blocks outside Australia.

TPC will acquire 29.4 million ordinary shares of Geodynamics at an issue price of Australian $ 1.5 per share, which is around the current market price.

Company officials declined to disclose when they hope to complete the deal and how they plan to fund the investment.

"This strategic partnership not only strengthens our renewable portfolio but also creates opportunities to get a foothold in the growing renewable energy market in Australia. We look forward to the synergistic opportunities that the alliance presents us," said Prasad Menon, managing director, Tata Power.

Share prices of Tata Power declined by 1.70 per cent on the Bombay Stock Exchange on Thursday to close at Rs 1,088.

Geothermal energy is the natural heat from the earth, where temperature increases with depth, typically by 10-50 degree Celsius per kilometre.

In enhanced geothermal technology, heat is extracted from granites located at a depth of more than 4,000 metres by circulating water through them, in an engineered artificial reservoir.

The heated water returns to the surface under pressure and is converted into electricity through a heat exchanger in geothermal power plant.

Geodynamics Limited is one of 32 geothermal energy companies in Australia trying to tap the potential of the renewable form of energy and it plans to start its first geothermal power plant by 2012 with a 50 MW demonstration plant, and thereafter raise the capacity to 500 MW by 2016.

It has geothermal exploration interests in three states in Australia including the licence for exploring 2000 sq km of area in the Cooper Basin, which contain the hottest granites on earth and are estimated to provide a thermal resource equivalent of 50 billion barrels of oil, said a company press release.

TPC currently produces over 500 mw of green energy, which includes 447 MW of hydroelectric power and 79 MW of wind power.

Besides, the company is adding over 120 MW of wind energy in Maharashtra, Gujarat and Karnataka. Over the next five years, TPC plans to grow its generation capacity from 2,474 MW to 12,861 MW, through thermal power projects.

"The funds raised from the equity placement are designed to strengthen Geodynamics' balance sheet and place it in a strong financial position to be able to make an investment decision with its joint venture partner, Origin Energy Ltd, on the construction of a 50 MW power station in 2009," said Gerry Grove-White, managing director, Geodynamics.  

In addition, the companies will target the potential of geothermal prospects outside Australia by leveraging their respective strengths.

Experts say that India has geothermal fields in the Himalayas, Cambay basin and the west coast, Bakreswar-Tantloi thermal province in Bengal and Bihar and in the Andaman-Nicobar region, with potential to produce over 10,000 MW of geothermal energy.

LNJ Bhilwara Group company Bhilwara Energy had recently announced to set up geothermal projects in India with plans to generate around 100 MW of power at an investment of Rs 1,000 crore.

BEL had also applied for licences for exploring geothermal sites in Ladakh and Chhattisgarh.