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Tata Power too plugs into 5/25 scheme, near deal for Rs 10,000-cr refinance

Tata Power is close to tying up a refinancing facility under the 5/25 scheme for Rs 10,000 crore that it borrowed to set up the loss-making Mundra ultra mega power project (UMPP), Anil Sardana, CEO & MD of Tata Power confirmed to FE. “We have proposed a change in the structure of the rupee debt for Mundra and are negotiating with bankers, so hopefully that will happen. We have already reduced our debt which is now at the normative level of approximately 2.33,” Sardana said.

The refinancing will take place via the Reserve Bank of India’s 5/25 scheme, the CEO said, pointing out that the tenure of the loan will be extended. “The original tenure was 12 years, of which nine years remain, and the loan will get extended accordingly,” he explained.

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The 4,000 MW Mundra UMPP, also called Coastal Gujarat Power (CGPL), is a subsidiary of Tata Power, accounting for close to 47% of total generation capacity. The Mundra operations have been a drain on Tata Power’s cash flows and profitability as the power purchase agreements (PPA) signed were based on lower coal prices and the company has not been able to pass on the higher cost of imported coal via higher tariffs.

While CGPL’s losses in FY15 narrowed to Rs 822 crore from Rs 1,164 crore in FY14, there has been an erosion in the net worth of close to Rs 3,800 crore. Had the company accounted for compensatory tariff of Rs 760 crore for the year, it would have made a manageable loss of Rs 14 crore. Bankers believe that with the price of coal having come down sharply over the past year to current levels of $50 per tonne, the Mundra project is viable.

In July 2012, the Indonesian government changed the rules for exports of coal, linking the prices to spot market prices, a move that affected power utilities dependent on imported coal including Tata Power and Adani Power. Tata Power first approached the Central Electricity Regulatory Commission (CERC) for a compensatory tariff in 2012, when it had sought a compensation of 62 paise per unit.

The company raised debt of around Rs 12,500 crore for the Mundra plant, of which Rs 2,500 crore has been repaid. The continued losses at this plant have forced the company to provide Rs 2,650 crore as impairment charges over the years. Tata Power said in its results release that no further provisions for impairment would need to be passed on for FY15.

Sardana said that there was a possibility the capacity at Mundra would be expanded. “We have approvals from the Gujarat government and the ministry of environment and forests has also cleared the proposal and referred it to the power ministry. But even if we start today, it could be five years before we can commission the project,” he said.

The CERC had in February 2014 approved a higher tariff for power from the project to compensate Tata Power for an increase in coal costs. Though the appellate authority on electricity had awarded Tata Power compensatory tariff for its imported-coal-based power plant, the Supreme Court asked the tribunal to revisit the issue. With the Supreme Court staying the orders of the CERC and Appellate Tribunal of Electricity granting compensatory tariff for its subsidiary CGPL, Tata Power has not recognised any compensatory tariff.


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