The Hindu Business Line : Tata Power may divest assets, holdings to part-finance capex

Chennai, July 8 Tata Power, which estimates its fund requirements at Rs 24,000 crore over the next four years, may consider divesting various holdings or assets to part-finance its capital expenditure programme.

In a presentation to investors in Hong Kong, a copy of which the company has provided to the stock exchanges, Tata Power has said that it will bring in own funds to the extent of Rs 6,000 crore. Of this, internal accruals will account for Rs 2,900 crore and preferential issue to Tata Sons Rs 1,900 crore. The balance will come, according to the company, from divestment of holdings or assets or equity dilution through warrants.

Tata Power’s subsidiaries include: Nelco (50.04 per cent stake), whose business is structured around automation and control and network systems with an operating income of Rs 197 crore; Tata BP Solar, in which Tata Power has 49 per cent and BP 51 per cent with March 2008 revenue of Rs 910 crore; and a transmission joint venture with Power Grid Corporation of India.

The debt portion of Rs 18,000 crore will come from domestic banks, financial institutions and foreign loans through external credit agencies and multi-lateral agencies such as ADB (Asian Development Bank) and IFC(International Finance Corp).

IFC has extended a Rs 1,800 crore ($450 million) 20-year loan to Tata Power for its 4,000 MW ultra-mega power project at Mundra in Gujarat. Likewise, ADB has provided a loan of Rs 350 crore for Tata Power’s wind power project in Maharashtra.

Tata Power has projected its installed generation capacity to go up from 2,389 MW to nearly 13,000 MW by March 31, 2013. Most of this capacity addition will come through between 2010 and 2013.

The company hopes to complete the Mundra ultra-mega power project (5 units of 800 MW each) by 2012, against 2014 according to bid conditions. It has achieved financial closure for the Rs 17,000-crore project with lenders including the IFC and ADB.

Tata Power has interests in generation, distribution and power trading.

According to the presentation, the company has qualified for about 8,000 MW of bidding-based generation projects while its captive power capacity (which the company runs for Tata Steel, another group company) will grow in tandem with Tata Steel’s requirements. It is exploring opportunities in both the independent power producer and merchant power producer models depending on coal mine allocation, besides looking at possibilities of setting up coal-bed methane projects. It will also increase its generation from renewable energy sources.

Tata Power has acquired equity interest in coal mines in Indonesia and has incorporated a special purpose vehicle in Singapore to own ships to meet its shipping requirements (mainly coal) and also for trading in fuels.