Only 5-7 players will remain in the renewable energy sector, says Tata Power CEO

Praveer Sinha, CEO and Managing Director, Tata Power   -  PAUL NORONHA

Mumbai, August 8

In a fast-evolving energy market, Tata Power has an installed gross generation capacity of 8669 MW, which includes an addition of 276 MW of renewable capacity.

In a conversation with BusinessLine, Praveer Sinha, who took over as CEO and MD of Tata Power in March 2018, spoke about the company’s EV roadmap, its expectation of a part resolution in its Mundra power plant, the consolidation in the solar power sector and the need for reforms in power distribution.

How do you see the role of electric vehicles and solar power playing out in India?

In India, I envisage every alternate house to use solar power. This is not something any business person can resist. Whether it will come in 2024 or 2030, it will come. One has to look at it in an objective way. The cost of solar production in India is the lowest in the world, and this is due to the economics around it.

In the case of EVs, it is seen as expensive in India and cost has to come down. Also, in EVs, there is not much choice — in terms of price points and car models. Then comes talks about the ecosystem, charging stations etc. To me, that is also not an issue: it is not difficult to put up a charging infrastructure.

Once these things are addressed, people will buy.

How has the tariff issue played out in the renewable space?

It is still playing out. We have around 20 players, and a lot of them played the valuation game. However, that did not happen.

The initial euphoria has gone. I don’t think many of them will survive. They will be taken over, and only 5-7 players will remain. There will be some sort of sensibility in terms of business.

Now, the business is more than just buying cheap Chinese panels or equipments and scaling up the business. India has to move up the value chain in renewable energy.

How do you see the business model of microgrids? Can it be scalable?

We are working on the scalability aspect of microgrids. It is not about supplying electricity, but creating an ecosystem to make people come around to accepting it.

How has the government schemes played out? There have been issues such as payments not happening in time..

Saubhagya was about 100 per cent electrification. But, it is also a fact that when you reach out to the villages, tariffs are not remunerative. Distribution reforms are needed. On every unit, a discom makes a loss. Either discoms are subsidising or the consumer pays for it in one way or another. This model cannot keep on working and corrections have to be made.

There have been not many buyers for power assets under the IBC. Have the developments Renascent Ventures pertaining to Prayagraj project acquisition put a damper on future acquisitions? (In 2018, Tata Power bought a 75 per cent stake in Jaiprakash Associates’ stressed asset Prayagraj Power plant in UP from the consortium of lenders led by SBI)

It is a challenge, but in the Indian context, regulatory issues take time to resolve. Power business is a business of patience, long-term outlook. There will be regulatory decisions that can go against you. But at the end of the day, there are checks and balances somewhere in the system. I remember the Trombay plant and the kind of challenges I faced when I took over when people were predicting that it will shut down.

At the end of the day, Tata Power has been in the business for 100 years and we know how to tide through the challenges.

Where do you stand on Mundra as of now? Tata Sons Chairman N Chandrasekaran had said that there are two or three options before the company..

Mundra has to happen with a pass-through (for coal). Otherwise, the plant is efficient and running well, but the Indonesian coal costs is hitting us.

We went to the High Powered Committee (HPC) who said that all the costs cannot be passed-through. So, some hair cut has to be taken.

The regulatory processes took time, and with elections, it got delayed too. Now all that is over, we expect a part resolution happening quickly. However, it will continue to be a stressed asset, but we will have money to service the debt. The objective will be to reduced losses.

There were reports that you are planning an InvIT..

These were very preliminary discussions and we decided to not go ahead with this. We have enough free cash on our books.

How do you see the per capita consumption of power?

Per capita consumption has gone up more than three-fold from 350 to 1200 units in 2019. Also, the generation capacity was 120 GW, and now it is 360 GW. The consumption and generation both have gone up. It can go further as more industrialisation and manufacturing happens.

In a slowdown, will consumption not go down?

These are things happening since the last 6 months. This is a country which has the biggest population, opportunity and growth. Definitely, we see an opportunity in the power demand.

How are you resolving the issue of debt of ₹17,43 crore?

One of the reasons for selling-off non-core assets has to do with rising debt. Tata Power’s gross debt in fiscal 2019 stood at ₹48,506 crore, marginally down from our previous fiscal.

Our debt-equity ratio has reduced from 2.5 to 2.2, and we have a target of bringing it down below 2 in the next twelve months. We are looking for significant growth in the years ahead, and divestment of investments that are not core to power and allied areas will be evaluated.

Published on August 09, 2019

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