Tata Power offers to sell 51% stake in Mundra project for ₹1

TACKLING DEBT CGPL writes to Gujarat govt, says has exhausted all options

NEWDELHI/AHMEDABAD: Tata Power Co. Ltd has offered to sell 51% stake in its Coastal Gujarat Power Co. Ltd (CGPL) unit, which runs the 4,000 mega watt (MW) power project at Mundra, for a token sum of ₹1.

In a June 7 communication to state-run Gujarat Urja Vikas Nigam Ltd (GUVNL) that has been reviewed by Mint, CGPL offered the stake to the discoms.

The move is a tacit admission by Tata Power of its inability to run the project at the existing tariff of ₹2.26 per unit. The project has been in a bind ever since the Supreme Court set aside a Central Appellate Tribunal for Electricity decision to allow Adani Power and Tata Power to charge compensatory tariff against the increased imported coal cost from Indonesia.

One option proposed is that GUVNL and other electricity procurers who had contracted with CGPL acquire the majority shareholding for a nominal charge. In turn, they would grant relief by purchasing the power at the revised tariff—making up for the under-recovery of fuel.

The other alternative suggested is to renegotiate present tariff and terms of the power-purchase agreement (PPA).

While the lead procurer of the power from the Mundra project is GUVNL (1800 MW), the other utilities who have signed PPAs with CGPL are Maharashtra State Electricity Distribution Co. Ltd, Ajmer Vidyut Vitran Nigam Ltd, Jaipur Vidyut Vitran Nigam Ltd, Jodhpur Vidyut Vitran Nigam Ltd, Punjab State Power Corp. Ltd and Haryana Power Generation Corp. Ltd.

“After exhausting all other options, CGPL has now suggested the below mentioned option to ensure the viability of the Mundra plant and are consulting on these with stakeholders. Its bankers have made a suggestion that if 51% equity is taken over on a back-to-back basis with the procurers, then the procurers would have advantage of competitive power for full life of the plant e.g. 40 years as also unrestricted generation even beyond 80% availability would give them access to higher generation at very low and competitive price,” Tata Power said in a statement on Thursday.

CGPL’s communication was also copied to Nripendra Misra, principal secretary to Prime Minister Narendra Modi; JN Singh, chief secretary of Gujarat; PK Pujari, union power secretary; and Sujit Gulati, additional chief secretary, energy and petrochemicals department in Gujarat. Adani Power has also sounded out the Gujarat government to sell 51% stake in its 4,620 MW plant, also at Mundra.

Pankaj Joshi, MD of GUVNL, didn’t respond to queries emailed by Mint. Experts likened the proposal to something akin to dealing with a stressed asset.

“It’s a suggestion to be evaluated in all seriousness where the promoter is ready to forego control and return; lending a hand in operating the asset to protect and make the project viable. It is like dealing with a distressed asset. It also helps parent company in managing reporting requirements,” said Sambitosh Mohapatra, partner, energy and utilities at PwC India.