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Global investors to infuse nearly $840 mn in power projects: Tata power CEO

Interview with Anil Sardana

Nirmalya Behera & Jayajit Dash 

Investment won't come just because someone's talking about it: Anil Sardana
Anil Sardana

has stepped up its focus on the renewables business, evaluating both greenfield and inorganic acquisitions. Anil Sardana, managing director and chief executive officer, Tata Power, tells Nirmalya Behera and Jayajit Dash how the company is looking at increased digitalisation and disruptive technologies to cut costs of thermal and solar power, and its efforts to tide over underrecovery at its 4,000-Mw Mundra power project. Edited excerpts:

What are your plans to build a green energy portfolio? How will the additional investments be funded?

We have ambitious plans to keep fuelling multifold growth across the value chain. We have gross generation capacity of 10,613 Mw, of which clean energy is 3,141 Mw, making us one of the largest non-fossil based energy players in India. To aggregate its clean and renewable energy portfolio, has initiated the process of carving out 500 Mw of clean energy assets from its books into Renewable Energy. This is a 100 per cent subsidiary and has an operating capacity of 1,959 Mw, comprising 907 Mw in wind, 932 Mw in solar and 120 Mw of waste heat generation capacity.

We have reiterated our commitment to clean energy and have announced our non-fossil fuel energy output to be 35-40 per cent by 2025. The company is also in the process of implementing organically nearly 500 Mw of renewable power projects at various locations.

Is solar power a key growth driver?
Solar power is a focus area of the government, with 100 Gw installation being targeted by 2022. In line with the target, will also focus on solar. New technologies like third generation photovoltaic have reached incremental efficiencies in lab tests. We wish to increase our solar businesses significantly over time, as the government is expected to bid out large scale projects to meet its target.

For wind energy, we will continue to look at opportunities as and when these come. The company is exploring multiple options, both new projects and acquisitions, to capture the market for both solar and wind-based generation. As of now, we are able to fund the proposed renewables' growth from internal resources. The company is also in the process of acquiring land parcels in Maharashtra, Rajasthan, Gujarat, Andhra Pradesh and Karnataka to develop solar and wind projects.

Solar power rates tumbled to record lows at recent bids. Will these be sustainable?

The falling rates are a result of falling solar module prices, easier availability and competitive capital, and excess capital chasing limited capacity, resulting in developers willing to take greater risks and perhaps with lower return. It will be unfair for us to comment on price bids of others and whether those are sustainable. Each bid has its unique parameters (solar park costs, location, solar resource, scale, offtaker, etc) and renders the comparability difficult. Central projects offer greater payment security and ease of approvals, which only some states can offer.

How does plan to cut costs of both thermal and solar power generation?
We operate both at benchmark costs and will continue to pursue digitalisation and other disruptive technologies, to optimise cost and efficiency.

Are you evaluating buyouts of any stressed power projects to boost your inorganic growth?

We have partnered global investors to invest as much as $840 million in projects. The platform has commitments from Canada’s Caisse de Dépôt et Placement du Québec, Kuwait Investment Authority, Oman’s State General Reserve Fund and ICICI Bank to take over troubled power plants that have regulatory uncertainties, fuel supply disruptions, low demand and high debt. Mostly, the collaborations intend to buy out power plants that are stressed.
After the Supreme Court order disallowing compensatory rates, you were looking to cut debt. Any progress?
After the order for CGPL’s (its Coastal Gujarat Power’s plant at Mundra, Gujarat) 4,000 Mw plant, we are pursuing all alternative options to tide over the underrecovery on fuel, including sourcing of competitive coal and use of low grade and blended coal options.
Efforts are also on to optimally refinance debt and minimise the total cost incurred on servicing.
The combined investments in Indonesian coal mines, along with investment in coal logistics and CGPL, when considered together, provide a natural hedge towards future fluctuation in coal prices. For long-term sustainability of the power station, however, the company is exploring all options to so structure the investment that it earns reasonable return.
What is Tata Power's total debt to equity ratio? What options are you considering for deleveraging?
The ratio is 3.09 and needs to be lowered to below sector normative levels of 2.33. We are evaluating options for sale of non-core investments.
Your take on power demand in the country?
The power ministry recently estimated that India won't need any new power plants for the next three years, with the present capacity of 330 Gw. These are operating at 60 per cent capacity because of poor offtake by distribution India’s per capita consumption of 1,000 Kwh is a third of the global average. If we have to improve consumption, it is the distribution sector that has to ensure it caters to consumers on a 24x7 basis.
It’s predicted that demand is likely to pick up after 2019, as the Ujwal Discom Assurance Yojana and village electrification programmes start yielding results.  However, as power plants take a long time to be commissioned, it is important to keep investing in the sector, so that energy is readily available when the country becomes hungry for it in 2019-2020 and beyond.

First Published: Sat, September 23 2017. 23:58 IST