Tata Power Interview

Tata Power, in a conversation with DSIJ, throws light on its Q3 performance and the company’s view on the power sector.

How do you read the December 2012 quarter results of Tata Power? Did they meet the management’s expectations?

Tata Power Company: Tata Power delivered a strong Q3FY13 and YTD operational performance. The company recorded increased operating profits and a growth in revenues. The consolidated Q3 revenues crossed Rs 9000 crore, while the YTD revenues were up by 28% at Rs 23993 crore.

How has the coal price movement in the international market been during the quarter? What should we expect going ahead?

Tata Power Company: The coal prices were stable for this quarter. They are influenced by a number of external factors that are difficult to predict. We generally rely on market experts for their views.

The gas-based plants have continued to face problems during this quarter. GAIL, however, has started operations from its LNG terminal in Dabhol. It is expected that this terminal will improve the gas supply to the adjacent states. What is your view on this?

Tata Power Company: The LNG terminal is expected to improve the receiving capacity of imported gas, which would increase the inflow to southern states. Gas-based power generation, however, remains expensive compared to coal-based generation.

On the gas front again, it is expected that the gas prices will increase in 2014 (Reliance Industries will be allowed to hike the gas prices). Since you are also operating a few gas- based plants, have you started factoring this hike in your projections? As for the gas-based plants, will the margins decline further or will this gas hike be a pass through?

Tata Power Company: Tata Power’s gas-based production capacity is very limited. If the gas prices increase, the cost of fuel may go up too. However, Tata Power’s Mumbai operations are on a regulated basis and hence, there won’t be any impact on profitability. With a shortage of gas in the country, we see a limited gas-based capacity addition in the coming future.

The government has continued with its power sector reforms. After SEB debt restructuring and FDI in power trading, it has now announced the coal price pooling policy. How will that help the sector? Also, the new policy will increase the coal prices for domestic coal consumers, pressuring their margins. What is the management’s take on this?

Tata Power Company: Coal price pooling will help the power sector by ensuring higher fuel supplies, reliable fuel availability and easing the demand-supply mismatch in the country. Domestic coal consumers are currently meeting deficits through coal imports, buying coal at spot prices or by operating at sub-optimal capacity. We are awaiting details regarding its implementation and would be able to comment on it thereafter.

Tata Power is also expecting a tariff hike in its Mundra project. The developments there would be very important for the power sector, especially for the power generating companies consuming the imported coal. Can you share the progress made so far?

Tata Power Company: The matter is sub judice before the CERC. The Commission has heard all the parties in the dispute and the next steps in the hearing are expected.