Tata Power has major plans for expansion in the renewables segment and the company is looking at 6-10 times growth in the next 5-6 years, says Managing Director and Chief Executive Officer Praveer Sinha.
The company reported a 92 percent decline in consolidated net profit at Rs 107.32 crore for the quarter ended March due to an exceptional adjustment in the previous year.
Sinha spoke with CNBC-TV18 about the financial results and outlook. Excerpts from the interview:
Q: Before coming to your results, I want to ask you about Mundra; already the losses have started falling there. When do you expect to get the advantage of a higher compensatory tariff? How will the current quarter look like?
As far as Mundra is concerned, the high-powered committee report came and subsequent to that the Gujarat government agreed to the modification of the power purchase agreement (PPA). The PPA has since then been circulated to the other four states and there has been discussions with them. The states, especially Punjab and Haryana, had certain issues in terms of accepting the revised PPA as suggested by Gujarat. However, they have discussed with us and we have now come to an understanding and hopefully we should be in a position to get this sorted out and go to Central Electricity Regulatory Commission and get a final approval in the next few months.
Q: In terms of a timeline, you are saying that the consent from all the five states could come through over the next few months itself?
A: Absolutely right. We have agreed and there has been consensus between us and Punjab and Haryana and so also with Rajasthan and Maharashtra. So we definitely expect that this will get sorted out and we are proposing to go to CERC next week or within ten days and thereafter we will try to get on board all the other states and get the PPA issue resolved.
Q: On Q4 numbers, what supported the business this time is the improved performance from the renewable segment. Can you tell us what was the overall plant load factor (PLF) there, what is the contribution and are you looking at aggressively expanding this business?
A: The Q4 performance for all our businesses have been good and the operating revenue, operating profit, EBITDA and profit after tax (PAT) before exceptional items, have improved tremendously in Q4 and even for the renewable business we see a huge improvement in the EBITDA as well as the PAT. We expect that going forward this will have much larger contribution. This year we commissioned 200 megawatt (MW) and there is another 400 MW which will get commissioned in this financial year. Therefore, we expect the impact of all this will improve the profitability of the renewable business.
As we had shared with you earlier, we have huge plans to grow and we are looking at 6-10 times growth in next 5-6 years in the renewable portfolio and we expect that this will play a major role in times to come for Tata Power.
Q: Going back to Mundra point again, loss will come down to zero once the new tariff comes in – that’s how it would be designed and then you would get some back charges. Can you give us any ballpark figure as to what would be the back charges that you may get and when. Will that be for second half, or will that be in the first half itself?
It’s difficult at this stage to give the exact numbers but as we had shared with you that the total under recovery is about 70 paise. We expect that 50 percent of that we will be able to recover, about 35 paise, and that recovery will happen from the period of October 15. So that is the amount. Typically CERC, whenever there is a retrospective recovery, gives a period of 6 months to the beneficiaries to make the payment so that there is no immediate burden on all the beneficiaries to pay the full amount.
What is the latest on Prayagraj? The UP state regulatory body had asked you to reduce the tariff before taking over. Have you agreed to lower tariffs and what would the impact be on your return ratios?
The UP Electricity Regulatory Commission (UPERC) order was on the petition file by State Bank of India (SBI). Our arrangement is with the SBI for the amount that has been agreed with them and we have not changed our arrangement with SBI. The matter was taken up in the Allahabad High Court last week and the court took cognizance of it and has referred the matter to Appellate Tribunal of Electricity (APTEL) for an early hearing and also to decide the matter quickly because it is in the interest of public. Since then we have filed the petition in APTEL and hopefully in the next 6-8 weeks a formal decision should come from APTEL.
Your PPA with Brihanmumbai Electricity Supply and Transport (BEST) is done and dusted, isn’t it? It is renewed, and Maharashtra Electricity Regulatory Commission has approved it, right?
Absolutely right and we have started supplying them power form April 1. This PPA is for 5 years and that is already on.
Q: To ask you about Prayagraj, if the UP government were to continue to insist on a lower tariff, does the deal stand?
A: No danger to the deal because it is not the UP Power Corporation who is the beneficiary, it is the UP Regulatory Commission which had taken a decision on reducing the tariff. Since we have gone to APTEL we expect some resolution in that.
Q: Would you want to apply for more power plants considering these ambushes that keep coming. Just now we heard that GMR Rajahmundry deal is done and sustainable debt has been cut, are you still interested in those other 7-8 plants that the SBI had?
Yes, we keep on examining many proposals. Of course we look at all the proposals through resurgent platform and we definitely look at them in terms of how much PPA is tied up, how much of coal is allocated and what sort of tariff is there. So we definitely keep on looking at it.
Your overall debt is still very high at almost Rs 49000 crore, and the standalone debt is even higher. Can you give us an indication in terms of a timeline by when do you plan to reduce your debt?
Our debt equity ratio has reduced from 2.5 last year March to 2.2 this year. Our debt absolute numbers have gone up but there has been some amount of debt repayment consequent to divestment that we did in Tata Communications in Panatone. We are also now going ahead with our divestment in some of our international assets, specially the one is South Africa and Zambia. Apart from that there are some other divestments that we are looking at in India. Hopefully many of them will happen in this financial year because the whole exercise and process takes bit of time. We expect that we will have a less than two debt equity ratio by the end of this financial year.
In this quarter, renewables have saved the day and the thermal as well coal have been very subdued. Do you see either of them or both of them doing better in the first half of the current year?
If you see, our performance in all the plants have been very good -- all our coal-based plants, transmission and distribution – all of them have done very well except Mundra. We also expect that coal prices should firm up and to that extent we should be able to get higher benefit from coal companies. We have done huge amount of blending in Mundra from 13 percent last year we have gone up to 35 percent this year. The benefits of that we could see in the last quarter and we expect that in future we will be able to maintain the trend.
First Published: IST