TATA POWER MOVING AWAY FROM GENERATION: CEO
“Right now, the share is 30% each, which will move to 40%, 40% and 20% (T&D, renewable and generation). This would be in terms of profitability” PRAVEER SINHA CEO & MD, Tata Power
Tata Power, which is into generation for more than a century, is making a conscious effort to move away from it.
The company plans to make just 20 per cent of its profit through generation over a period of time with the remaining planned from transmission & distribution (T&D) and renewable energy.
“Right now, the share is roughly 30 per cent each, which will move (over a period of time) to 40 per cent, 40 per cent and 20 per cent (T&D, renewable and generation). This would be in terms of profitability,” said Praveer Sinha, chief executive officer (CEO) and managing director (MD) of Tata Power.
More than a year ago, Tata Power clubbed its businesses into separate clusters – its thermal assets are under the generation cluster. The other two main clusters are T&D and renewable, which also includes solar manufacturing.
Sinha said that in the absence of any major capital expenditure in generation, investment made and planned in the T&D business and renewable will start showing returns.
For the T&D business alone, the company expects profits to double over the next few years. The company’s generation cluster does not include Coastal Gujarat Power (CGPL), the subsidiary which houses the Mundra power plant.
Sinha expects losses from the Mundra power plant to be one of its lowest in the current financial year. Mundra’s annual loss in FY20, he said, is expected to be ~900 crore.
In FY19, this loss was ~1,700 crore. “The nine month loss for Mundra was at ~650-700 crore. Better fuel management, blending of coal and coal prices falling have helped. This will be one of the lowest annual losses for Mundra,” Sinha said.
The company is also in the process of renewing its mining licence in Indonesia. Sinha said the renewal application will be filed next month; the licence for the PT Kaltim Prima Coal expires in 2021.
The company does not expect any significant change in the terms and conditions of the licence. The Mundra plant is also awaiting clearance from multiple states for a revised tariff, which will help the plant half its losses. “We continue to pursue CGPL tariff revision with the state government,” Sinha said.
Tata Power is also in the process of monetising non-core assets. Sinha said that in the next one year, Tata Power plans to divest $1 billion worth of assets. These include Indonesian coal mine PT Baramulti Sukses Sarana Tbk (BSSR).
As part of its divestment plan, Tata Power is exploring various financial instruments, including the infrastructure investment trust (INVIT) model. “We definitely look at various financial models, which will help us grow and at the same time does not overleverage us. These are new models. With changes in the Budget, one needs to understand what the impact is. These are things which are still under discussion. We will look at it,” Sinha said.