Tata Power will be net zero-carbon by 2050, says CEO Praveer Sinha

We have now both urban and rural consumers. Our whole business philosophy is towards renewable, said Sinha

Despite another year in a tough market due to Covid-induced lockdowns, Tata Power has been able to sustain good performance, which banked on deleveraging. In an interview with Jyoti Mukul & Shreya Jai, Tata Power Managing Director and Chief Executive Officer Praveer Sinha says the company will monetise renewable assets based on best returns to existing shareholders. Edited excerpts:

How will be the company’s shift towards renewable energy?

We took a stand last year that we will not make any new investment in coal or even through our platform Resurgent. We will be net zero-carbon by 2050. This could happen earlier and so we are now looking at the power-purchase agreements we have and when they are completed. We will like to discontinue after that. We are looking at all business models in renewable, like utility scale renewable, roof top and solar pumps. We have a 2,667-Mw renewable capacity and another 1,300 Mw is under implementation. We expect to commission 1,000 Mw this year and we are in advance stages of implementation. There was some delay because of Covid and also because they have to be synced with the evacuation line. We will commission 500 Mw by July. We will end the financial year with 3,700 Mw.

Why is the infrastructure investment trust (InvIT) for renewable assets delayed, and is it that you are looking at an initial public offering for this business?

This is still under discussion. We have not taken a call on what structure it will take. We want to take a long-term decision, keeping in mind the interests of shareholders and the company. When we started, we had this huge challenge of debt. Two years back, the debt-equity ratio was in the range of 2.5. We took a decision to clean up and one of the options was to sell our investment in some other companies. We were able to tie up the sale of the shipping and defence businesses. We also sold the South African wind business and then we also got preference capital from Tata Sons, which showed that they were convinced about capability. All this helped us in reducing our debt from more than Rs 43,000 crore to about Rs 35,000 crore this year. We need to take a decision on our renewable assets. At that time, we took a view on just our utility scale business to flip into an InvIT but now we are in a much better position. In our discussions with investors and other analysts, we got feedback that we can have a larger play.

What is the plan for the power distribution business?

We had 2.7 million customers in distribution on April 1, 2020. Then we took over the Odisha distribution business. The state has 9 million customers and now we have around 12 million consumers, which makes us by far the largest private sector power distributor. The number two is not even five million. Our experience in the past 10 months in Odisha is that our performance has improved and in this short period cumulatively all the discoms have made profit. We will do much better on return on equity but have also done well in aggregate technical and commercial losses, and the collection incentive. We have now both urban and rural consumers. Our whole business philosophy is towards renewable.  

Is the company looking at any fresh fund raising and whether it would be for capital expenditure or debt reduction? What is the objective of non-convertible debenture (NCD) issuance? 

The NCD is for repaying the earlier NCD which were at higher cost. We already have an approval for Rs 5,500 crore NCD so it is not a new NCD but readjustment of the earlier NCDs. We have very robust cash flow and based on that we will make investment in transmission or distribution or any new business. Money will come from internal cash flow and little amount of debt.

What is the status of restructuring of Coastal Gujarat Power Ltd (Mundra power plant)?

Last year, we took three actions in Mundra – first, we did blending of coal which to a large extent helped us to buy different types of coal from the spot market. It offered us flexibility and we could bring down our under recoveries. Second, we paid back a loan of Rs 4,000 crore from our total loan of Rs 8,000 crore, through divestment etc. Third, we took up the aspect of the merger of Mundra with Tata Power. We got the approval from the NCLT to go through the process. We have done the EGM approval and approval of secured creditors and other lenders has been received. Due to Covid, the court is not sitting. The matter should get finalised soon.  

The compensatory tariff under high powered committee of Gujarat could not happen as there were some challenges. Court asked it to be resolved bilaterally. Bilateral decision has not happened. Both sides will pursue. 

But isn’t the Mundra power plant still contributing losses?

Yes. Mundra had under recovery of 90 paisa a year before last which we brought down to 45 paisa last year. Under recovery will be there but it will be reduced drastically and going forward we will bring it down to the minimal.