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Tata Power Bets On Divestments, Renewables To Pare Debt

Tata Power expects to raise $1 billion by divesting assets in South Africa and Zambia over 12-18 months, CEO Praveer Sinha says.

An electrical substation stands outside a Tata Power Delhi Distribution Ltd. office in New Delhi, India. (Photographer: Prashanth Vishwanathan/Bloomberg)
An electrical substation stands outside a Tata Power Delhi Distribution Ltd. office in New Delhi, India. (Photographer: Prashanth Vishwanathan/Bloomberg)

Tata Power Company Ltd. aims to pare debt through disinvestments and by switching to asset-light investments, its Chief Executive Officer and Managing Director Praveer Sinha said.

“We’re already at a debt-to-equity level (ratio) of 2.2 times and we expect to bring it down to less than two times in the coming quarters,” Sinha told BloombergQuint in an interview. The power utility also expects to raise $1 billion by divesting its assets in South Africa and Zambia over the next 12-18 months, he said.

That comes as Renascent Power Ventures—a joint venture between Tata Power and ICICI Bank Ltd.acquired real estate baron Manoj Gaur’s biggest power plant at Prayagraj, Uttar Pradesh, last week. The deal was struck after the venture agreed to take over Rs 6,000 crore of the company’s debt.

The Tata Group company expects investments in asset-light models such as roof-top solar, electric-vehicle charging infrastructure and home automation to drive growth. “Also, a lot of the fringe, small players in renewable energy space will move away due to consolidation and only those having the ability to stay in the long run will be there in the market,” Sinha said.

Mundra Plant Outlook

Tata Power also plans to resolve tariff issues surrounding its power plant in Mundra, Gujarat, by the end of the ongoing financial year. It had earlier sought a hike in tariffs from the five states the 4,000-megawatt plant supplies to.

Sinha also cited lower coal prices and sourcing of quality coal through spot purchases as reasons behind the reduction of losses at the plant. “We expect the (coal’s) prices to remain soft for the next few quarters.”

“But even with Mundra resolution and high powered committee recommendations, we will never be able to make a profit but our losses will come down substantially." he said. “The loss was about Rs 1,700 crore last year and our losses would come down to Rs 1,000-crore range. And, with the committee’s resolutions, it should half."

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