debt reduction plans: Expect to bring down our debt by 50% this year: Tata Power CMD

debt reduction plans: Expect to bring down our debt by 50% this year: Tata Power CMD

Compared to pre-Covid levels, our power demand is only about 10% less now, says Praveer Sinha.

Let us first talk about whether or not demand is really shaping up. Is there any significant recovery from the recent lows that we have seen?

The demand has picked up from the lows of April; from a low of about 125 gigawatt on an overall basis, we are now at about 165-166 gigawatt, which is good news. In pre-Covid period summer months, it would have been about 180 gigawatt. So we are about 10% less than what it would have been if it was business as usual. But we have seen that in the last two-three weeks, the demand has picked up, the collection has picked up and there is a general increase in the consumption of electricity, especially from the industrial sectors as the industries have opened up.

Another important development has been the real time exchange of power. How important a step is it and for players like yourself who are also dependent on long-term power purchase agreements (PPAs), does it help to offload excess capacity?

The directional change has happened whereby you have a real time market and that is where the flexibility comes for generating companies to ramp up or ramp down depending upon the need of the hour. More importantly, it also gives depth to the market. Today our real time market is a very small market. The trading that takes place is not very large in quantity but with the real time market coming in, it gives an opportunity both for conventional and renewable generation to trade in the market.

I am sure the competition in this will also bring lower prices which will be beneficial for the consumers. So it is a very important directional step that has been taken by CERC and the government and I am sure as it moves forward, we will see the other benefits of coming in, especially in terms of the ancillary markets where frequency trading can also take place. This will especially help many of the renewed technology in terms of storage and others to benefit and their usage will also increase.

Let us talk about Tata Power in specific. Your quarterly numbers are remarkable despite so much uncertainty around the sector. Tell us a little bit more in detail about the debt reduction plans that you have in the pipeline and what sort of debt to equity ratios are you targeting for FY21?

Tata Power’s performance has been good not only in the last quarter but for the whole year. Operationally, all our plants are doing very well. Our network and distribution systems have been doing very well and we do expect this to continue even during Covid period. All our people have operated the plants, our network has worked and in spite of the cyclone yesterday, our things were fully mobilised to take care of the requirement. So operationally Tata Power has been very consistent and very resilient in its performance.

About the debt reduction; we started this initiative two years back. There was some delay but we have been able to close many of the deals including Panatone, Tata Communication and defence business and then during the Covid period, we concluded and got the money for the South African divestment. We are in very advanced stages of closing some other divestments that we have planned for this year; the BSSR’s coal mining into this year and the hydro plant in Zambia. So we will do it within this year notwithstanding the Covid. There are very good discussions going on.

Similarly on the renewables side, we are looking at some platform structures which will help us bring down our debt substantially. So we are on target notwithstanding the Covid and the year-end plan is that we will reduce drastically nearly 50% of what we are today; we will be there in that range. So aspirationally, we are working towards this and we are confident of meeting our targets and timeline.

Let us talk about Mundra. The power minister had allowed individual states to alter and even allow the passthrough of higher rates. Could you set a timeline for the Mundra resolution?

That got decided on 20 March and then the lockdown started from 24 March. So there has not been much progress. All the state governments are fully occupied with the Covid and health issues and how to take care of people during this difficult period. This is not the right time to go and approach them. It would be very unfair at this stage to go and approach them. However, the understanding is that the proposal from at least Gujarat and Maharashtra is ready to go to the cabinet. As soon as the things stabilise and the offices start working normally, we expect this to happen. But it is difficult at this stage to tell you specifically when it will happen. But maybe in another two-three months, it should definitely get through because the government is very keen; both the states have shown huge commitment and we are expecting this will get resolved very quickly.

Given your portfolio and also Indonesian coal mining business there has been a lot of uncertainty regarding coal prices. Do you see that fading away?

I do not think a whole lot of transactions have taken place in Indonesia. All the importers of coal from Indonesia, whether it be China, Japan, Korea, Malaysia, have been importing including India and there has not been very substantial reduction in the coal prices. The arga Batubara Acuan (HBA) prices came down during a certain period but it has again gone up and what we also find is that because of the restrictions imposed by China to get coal from Australia, the coal transactions from Indonesia continue to be there as it was earlier.

Of course, the good thing is the mining license for the KPC which was ending next year in December, for that the law amendment has happened in Indonesia and based on the amendment to the mining laws, we will get the extension within next few months.

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