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Tata Power Co. Ltd is evaluating stranded power assets that it will acquire if it finds them attractive, Tata group chairman Cyrus Mistry said on Wednesday. The company sees opportunities in the power sector, particularly renewable energy and distribution and in turning around stressed assets, Mistry said in his address to Tata Power shareholders at the company’s 96th annual general meeting (AGM).
The country’s oldest private producer is in the midst of talking to power companies for evaluating their stressed assets, said chief executive Anil Sardana. “We are certainly evaluating stranded assets, but I don’t want to declare numbers,” he said.
Most power companies are weighed under by debt, which has forced some of them to dispose of assets. Tata Power, Adani Power Ltd and JSW Energy Ltd are among a handful of buyers who have shown interest. Sardana said Tata Power was also trying to sell its stake in an Indonesian coal mine company, but was yet to finalise the terms with bankers.
In 2014, Tata Power agreed to sell a 30% stake it held in PT Arutmin Indonesia, and its associated infrastructure assets, to the Bakrie Group for $500 million. “We are now waiting for condition precedents to be liquidated. One of the important parts of that is to restructure the investment companies,” he said.
Tata Power acquired a 30% stake in two Indonesian thermal coal companies owned by PT Bumi Resources—PT Kaltim Prima Coal (KPC) and PT Arutmin Indonesia—in 2007 for about $1.1 billion. The purchase was to control costs of fuel for its Mundra Ultra Mega Power Project (UMPP) in Gujarat.
The investment firms are a common part of the two mine firms and now need to be divided or restructured so that Tata Power can retain its stake in KPC. “And that part of change is still not happening because lenders want to wait for the ent-ire situation to improve in terms of the pricing,” Sardana said.
The stake sale was intended to bring down debt as Mundra continued to face challenges and the company sought to address its cash flow concerns. The losses at Mundra have created stress on Tata Power’s balance sheet due to cost under-recoveries—the cost of electricity generated at the plant is more than the selling price.
Sardana said the company was hopeful that the judgement on compensatory tariff for the Mundra project will come in the next few quarters. Last year, the Supreme Court had stayed an order by the Appellate Tribunal for Electricity, allowing Tata Power and Adani Power to charge higher prices for electricity produced from their plants in Mundra. “We hope the legal system will deal with the subject judiciously,” Sardana said.
Tata Power on Wednesday reiterated that it would raise generation capacity to 18,000MW by 2022 from the current 8,750MW, and that it would grow revenue in value-added businesses by 10 times in the same period. It had said last month that about 20-25% of the 18,000MW capacity would come from clean and green sources.
The company’s consolidated debt as on 31 March stood at Rs.40,841.87 crore. Tata Power also said it was hopeful of commissioning its largest wind farm in South Africa in 2016. At the AGM, shareholders approved the company’s plan to raise Rs.4,000 crore by issuing non-convertible debentures. Sardana said the company would use the money to fund different investments.
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