Companies

Tata Power Q1 profit rises 10%, revenue falls 11.8%

Our Bureau Mumbai | Updated on August 12, 2020

Tata Power will also be scaling its solar cells and modules manufacturing business along with the solar EPC business   -  Bloomberg

Plans to set up India’s largest renewable InvIT

Tata Power plans to set up India’s largest renewable infrastructure investment trust (InvIT), which will have a total capacity of 4.1 GW.

Praveer Sinha, CEO and Managing Director, Tata Power, said the Renewable InvIT will be the company’s growth engine going forward. “At present, we have about 2.6 GW of operating plants, and 1.5 GW of capacity is in the pipeline, taking the total capacity to 4.1 GW,” said Sinha.

The company made these announcements on the sidelines of reporting its Q1 results. Tata Power reported a 10 per cent rise in consolidated profits for the June-ended quarter, on the back of strong cash generation and tight working capital. Profits came in at ₹268 crore, compared with the ₹243 crore posted in Q1 FY20.

However, revenues in the June-ended quarter dipped 11.8 per cent to ₹6,671 crore compared with ₹7,567 crore in the same period last year. The dip was due to a combination of factors, including lower power demand, delay in solar EPC businesses on account of Covid-19 and lower coal prices.

Recycling capital

“The trust provides Tata Power with an option to recycle capital once the assets are operational. Further, the InvIT strategy enables Tata Power to raise capital at a lower cost post-stabilisation of assets and grow the portfolio whilst we deconsolidate its debt,” said Sinha.

In the company’s recent AGM, Chairman N Chandrasekaran had said it will look to bring down debt to around ₹25,000 crore.

Apart from adding capacity in renewable generation in the next five years, the company will also be scaling its solar cells and modules manufacturing business along with the solar EPC (Engineering, procurement and construction) business, Sinha added.

Merger

In the quarter, the company’s Board also approved a scheme to merge Coastal Gujarat Power Ltd (CGPL), Tata Power Solar Systems Ltd (TPSSL) and Af-taab Investment Company with the parent company. CGPL, a subsidiary which runs the Mundra ultra-mega power plant, has been a drag on the company’s finances, has already suffered large losses, and is facing difficulty in financing its operations. Tata Power has invested ₹24,000 crore in Mundra.

“Given the inordinate delay in resolution of the tariff matter, the merger will provide relief through direct support from the parent company. The company continues to be in discussion with various State governments and state discoms (distribution companies). We do hope that the State governments will take a practical view and resolve the PPA (power purchase amendments) issue in the interest of all stakeholders,” the company said.

Solar projects

In the June-ended quarter, Tata Power Solar received a Letter of Award (LOA) for Solar EPC contract from NTPC for a 300 MW solar project. With this order, the order book of Tata Power Solar is approximately ₹8,700 crore.

In Q1, Tata Power Renewable Energy Ltd (TPREL) received an LOA from Gujarat Urja Vikas Nigam Ltd (GUVNL) to develop a 120 MW solar project in Gujarat, and an LOA from Maharashtra State Electricity Distribution Company Ltd to develop a 100 MW solar project in the State.

Tata Power Green Energy Ltd (TPGEL) also received an LOA from Mumbai Distribution to develop a 225 MW hybrid (solar and wind) renewable project. Tata Power also recently won another bid of 370 MW for which the formal LOA is awaited.

Published on August 12, 2020

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