Mumbai: Tata Power Co. Ltd, the country’s largest independent power producer, swung to a third-quarter loss from a year-ago profit owing to the troubles faced by its Mundra project in Gujarat.
The company also said on Monday in a stock exchange filing that it has decided to transfer its 75% interest in Indonesian mines to fully owned subsidiary Coastal Gujarat Power Ltd (CGPL), which runs the Mundra project. The move is to assure the lenders to CGPL of sustained cash flows.
The Mundra Ultra Mega Power Project (UMPP) has been hit by the change in coal pricing policy by the Indonesean government. Tata Power had, in 2007, bought a 30% stake in Indonesian mining company PT Bumi Resources and its two subsidiaries and also inked long-term contracts for the supply of coal to the Mundra project.
“Tata Power’s credit ratings have taken a beating due to the Mundra project, which resulted in higher interest cost for the company,” said Rupesh Sankhe, senior research analyst at Indian broking firm Karvy Stock Broking. “If the cash flow at CGPL improves, it will also have a positive impact on the company’s credit ratings as it will give some comfort to lenders.”
Tata Power made a net loss of Rs.328.92 crore in the December quarter compared with a net profit of Rs.297.95 a year ago. This was its second loss in successive quarters.
The loss was mostly on account of an impairment provision of Rs.850 crore for the first nine months of fiscal 2013 and Rs.600 crore for the third quarter for the Mundra project. Profit also took a hit on account of higher financing costs and losses in foreign exchange.
Gross revenue rose 28% to Rs.9,039.31 crore in the quarter from Rs.6,660 crore a year ago. The interest burden rose to Rs.178.84 crore from Rs.130.81 crore in the year-ago period. The company had a foreign exchange loss of Rs.42.08 against a gain of Rs.273.79 crore a year ago.
CGPL had previously filed a petition before the Central Electricity Regulatory Commission (CERC) seeking tariff revision for the Mundra project. With the central power regulator having completed hearings, Tata Power said “the company eagerly awaits CERC’s decision on tariff revision for Mundra UMPP to address persistent impairment charge issue”.
The statement cited managing director Anil Sardana as saying, “Our generation capacity touched 7,700 MW with the commissioning of Unit 4 of the 4,000 MW Mundra Ultra Mega Power Project (UMPP), reinforcing our position as the largest integrated power company as well as private power producer in India.”
Tata Power has commissioned its UMPP ahead of schedule, he said. “So, it hopes that a decision in respect of fuel prices is taken early and constant impact on Tata Power’s net worth is salvaged,” he added.
Indonesia changed the norms for coal exports in September 2011 and linked the price of the fuel to international indices, making long-term agreements signed by Indian power companies such as Tata Power, Reliance Power Ltd, Adani Power Ltd and JSW Energy Ltd, among others, null and void.