The company currently has under-recovery of Rs 900-1,000 crore and a natural hedge due to its four mines in Indonesia, says N Chandrasekaran
Tata Power Co sees gains of Rs 1,000-Rs 1,200 crore annually for the next 20 years by giving up its stake in Mundra's Coastal Gujarat Power Ltd (CGPL) project.
The company also plans to sell its non-core assets to reduce its gross debt of Rs 48,816 crore.
"We are willing to forego 51% equity (in CGPL), provided the procurer is ready to make good the under-recovery. We might give away around Rs 3,000 crore on equity, but we stand to gain is around Rs 1,000 to Rs 1,200 crore every year from the procurer, who will have to pay us for the next 20 years. They (procurer) too has an advantage as they would get power for a cheaper rate," Anil Sardana, CEO and managing director, said at the 98th annual general meeting of the company.
N Chandrasekaran, chairman of Tata Power, said the company currently has under-recovery of Rs 900-1,000 crore and a natural hedge due to its four mines in Indonesia.
"Nevertheless, it's a significant investment we have made, which is close to $ 1.2 billion in the Mundra plant. So, we would like to solve this issue and there are two solutions. Either we get some kind of resolution from the procurers and the regulators or we find a cheaper coal, which doesn't seem to be working so far. We are exploring options."
In June, CGPL had offered to sell 51% stake in its 4,000 mw Mundra power project for Re 1 to states like Gujarat which buy electricity from it in order to rescue the debt-laden, loss-making business.
CGPL wrote to Gujarat Urja Vikas Nigam Ltd earlier this month offering to retain only 49% stake and operateing the project subject to grant of compensatory tariff to CGPL for the entire period of power purchase agreement (PPA).
A couple of months ago, CGPL had approached the procuring states to arrive at alternative solutions to minimise operating losses including by offering 51% shareholding in CGPL at a nominal value of Re 1 to procurers subject to grant of compensatory tariff to CGPL for the entire period of PPA.
During fiscal 2019, the company plans a capital expenditure of about Rs 3,000 crore to increase power generation capacity. "Currently we have around 10,000 mw with approximately about 3,000 mw of clean energy, roughly 1,000 mw each in solar, wind and hydro. Our plan is to double the capacity to 40-45% from clean energy." The thrust will be particularly in renewables, transmission and distribution.
As the debt level is high at Rs 48,816 crore, the company is also examining various debt reduction options including sale of non-core assets of subsidiaries. "The company is into the defence sector and we are trying to see whether we can get our non-core assets from the company so that we can reduce the debt, but as a group we will continue to look for opportunities in the defence sector," said Chandrasekaran.
Additionally, the entire corporate structure of the organisation will be simplified, there are more than 90 subsidiaries and associate companies. As a result, the company is working on a plan to simplify the corporate structure where feasible.
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In June, CGPL had offered to sell 51% stake in its 4,000 mw Mundra power project for Re 1 to states like Gujarat which buy electricity from it in order to rescue the debt-laden, loss-making business.
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