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Tata Power profits rise on high coal prices, low costs

Tata Power profits rise on high coal prices, low costs
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First Published: Mon, Feb 14 2011. 10 31 PM IST
Updated: Mon, Feb 14 2011. 10 31 PM IST
Mumbai: Tata Power Co. Ltd on Monday said quarterly profit increased nearly fivefold as its mining business benefited from the rising global price of coal.
Profit in the quarter ended 31 December increased to Rs442.37 crore from Rs92.57 crore a year earlier.
Net revenue declined 1.7% to Rs4,412.91 crore. But the company gained from higher provisions last year for stripping costs—a technical term for expenses related to coal mining—that helped it cut costs in the latest quarter.
India’s largest private utility spent Rs370.67 crore to mine coal last fiscal, increasing costs. This year, it saved Rs71.43 crore from mining.
Executive director S. Ramakrishnan said a revision in stripping ratio last year also helped. A revision of the mine stripping ratio—a measure of the waste material that has to be removed in a coal mining operation and which reflects the cost of coal extraction—made the firm write down past mining expenses in December. “It is just a accounting entry, the money has already been spent. But higher global coal prices helped.”
The firm sold 16 million tonnes (mt) of coal this year, against 17 mt last year, but realisations increased to $75 (Rs3412.5) a tonne from $60 last year.
Tata Power owns 30% each in three Indonesian coal mining companies—PT Kaltim Prima Coal (KPC), Bumi Resources and PT Arutmin Indonesia.
Rupesh Sankhe, an analyst at Angel Broking Ltd, said the firm’s profit has to be looked at in the context of the adjustment for the stripping cost. “Mining output has also fallen because the weather conditions have not been good, and the power business will only start making money when more capacity comes on stream, possibly in 2012-13 or beyond,” he said.
The firm’s coal business, which is secondary to its main power generation, transmission and distribution business, swung to a profit of Rs432.57 crore in the December quarter from a loss of Rs171.17 crore a year earlier.
Profit at the main power business, however, dropped 22% to Rs401.82 crore, which the firm blamed on low merchant rate realization and unscheduled maintenance.
Merchant power rates have dropped to Rs3.50 a unit from Rs5 a unit last year.
Tata Power shares ended up 3.74% at Rs1,241.30 apiece on the Bombay Stock Exchange on Monday, in line with a 2.67% rise in the benchmark index to 18,202.20 points.
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First Published: Mon, Feb 14 2011. 10 31 PM IST
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