Tata Power has commissioned the first ultra mega power project in the country. The first of the five 800 MW of the Mundra 4,000-MW power plant, based on imported coal, is operational. However, its profitability is expected to take a hit with Indonesia directing that all coal shipped out of the country be benchmarked to international prices (from September last year).

Mr S. Ramakrishnan, Executive Director, Tata Power, spoke to Business Line on the overall power scenario, the impact of coal, pricing and the steps taken by Tata Power to curb losses on the fuel front.

The Mundra project is said to be one of the best in terms of project funding. How did you go about it?

At that time, to raise a huge amount for one project was not easy. We had to use multilaterals such as IDFC and ADB to fund the project. We had a foreign exchange content of almost 60 per cent. Most of our imports were funded by forex loans.

You had said that a mix of low grade coal is being attempted at Mundra to bring down fuel cost?

We have just commissioned the plant and are using some low grade imported coal. But one has to see whether the low grade coal price will be set off by increased consumption. Now that we have commissioned the plant, we will know how much we lose in inefficiencies. We believe it will still be beneficial, but we have to wait and see.

What is the spread in your current portfolio?

Of 5,297 MW, hydro-electric is about 450 MW , wind-375 MW , solar-30 MW , gas-200 MW , and oil -500 MW. The rest is thermal.

And, the target Tata Power has set for solar and wind power …

Ideally, we wish to do 100 MW in wind a year. We had originally said we wanted to do 500 MW . Our idea now is to do 100-150 MW if the regulation and REC mechanism work favourably. Solar is a bit dicey. It depends on the regulatory environment. The Jawaharlal Nehru National Solar Mission is very competitive. I don't know whether we can make money. Moreover, State regulatory processes are being reset. Prices are being reset as State regulators have now found that the prices they have set are high. Also, some are thinking whether they should set a price or allow competitive bidding. Ideally, we want to do about 25 MW of solar every year.

What are the risks if tariffs keep dropping, as the older solar plants command a higher tariff?

The only risk is if the buyer of power does not want to honour your power purchase agreement. Then you have a problem, as others will ask you to supply at the current rates. However, Tata Power is only dealing with Gujarat and its own distribution companies.

So, Tata Power will not have any issues?

I hope so; even though we have tied up with our own companies, everything is regulated. Since the regulators have approved the power purchase agreements, they will honour the tariff commitments.

Will Tata Power hold back on solar for the time being?

We have set up 25 MW in Gujarat and it is doing well. We have three MW in Maharashtra where the tariff is good but generation has to pick up. We have bid for four or five MW in Karnataka. We have land in Rajasthan which does not have evacuation facilities. Once that is up, we will bid. And, we are also talking to Tata Chemicals for more land.

What are your expansion plans in Maithon and Mundra?

Land acquisition is time consuming. So, we are thinking of expanding in Maithon and Mundra where we have land. We are looking at two of 660 MW in Maithon and two of 800 MW in Mundra. Environment studies are on. Though the additional 1600 MW in Mundra will also be based on imported coal, we need not sell it Rs 2.26 per unit — the power purchase agreement tariff inked with the procurers. However, environment clearance for Mundra expansion is important. We have the in-principle approval to conduct environment studies.

You were talking of transfer of coal assets to Coastal Gujarat Power Ltd (SPV for Mundra) to provide the plant financial support. Has it happened?

We are studying the various implications. What we are trying to tell the lenders is that the financial strength of the coal holding company will be made available to Coastal Gujarat. Whether it can be made available through transfer of shares or some other method of providing the financial support is also being looked into. We are also talking to government to ensure we have an import policy on coal and how the pricing of power for coal projects can be done.

Have you spoken to your power procurers for increase in tariff?

It is extremely difficult to tell somebody ‘please increase my rates'. We are trying to make them understand that without a tariff revision we would have to go strictly by the contract as per the legal requirement, which means we have to make the plant available only for 80 per cent of the time. We do not have to make it available for 92 per cent, which we can. We have told them, even if their power purchase cost of Rs 2.26 per unit becomes Rs 3, it still is competitive as far as tariffs go today.

Have your procurers responded favourably to this?

They are still hearing us on why we believe they should look at a revision.

murug@thehindu.co.in

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