Mumbai: Tata Power Company Ltd, India’s largest private power generation company which also supplies power to parts of Mumbai and Delhi, plans to raise Rs16,500 crore in debt within the next five years to finance a programme that will raise its power generation capacity to 9,300 megawatt (MW) from the current 2,300MW.
Simultaneously, Tata Power also plans to sell the stake it holds in some of the associate companies that are part of the Tata Group, such as Videsh Sanchar Nigam Ltd (VSNL), Tata Consultancy Services Ltd (TCS) and Tata Teleservices (Maharashtra) Ltd. The company holds 15% equity in VSNL, 1% in TCS and 18% in Tata Tele (Maharashtra). At Thursday’s closing prices on the Bombay Stock Exchange (BSE), the sale of these stakes will fetch Tata Power Rs2,726.51 crore.
Tata Power’s stock fell by 1.8% on the BSE on Thursday to close at Rs589.25 while the exchange’s benchmark index, Sensex rose by 0.92% to close at 14,545.46. Tata Power is also issuing preferential shares to parent Tata Sons in two steps: the first will raise Tata Sons stake in the company by 5% to 37% and will raise Rs640 crore. The company would also consider a rights issue at a later date, Tata Power’s managing director Prasad Menon said.
The 7,000MW of capacity the company will add by 2012 includes the 4,000MW ultra mega-power project in Mundra, Gujarat; a 2,400MW project in coastal Maharashtra; 500MW at the company’s Trombay plant in Mumbai; and a 100MW diesel plant for Mumbai. The company is also in discussions with the governments of Orissa, Chhattisgarh and Jharkhand for putting up an additional 3,000MW.
Of the Rs16,500 crore of debt being raised by Tata Power, Rs12-13,000 crore will go towards financing the 4,000MW power project in Mundra, while the rest will go towards funding the acquisition of a 30% stake in Indonesia’s largest coal producer, PT Bumi Resources.
Tata Power acquired the stake in Bumi for $1.1 billion (Rs4,510 crore) in April 2007, excluding the cost of finance and bankers fees. The coal will be used for the company’s coastal power plants in Gujarat and Maharashtra. The company is awaiting government clearance on land for the Maharashtra power plant; it is in the process of placing orders for the machinery for the Gujarat plant.
Menon said that two special purpose vehicles are being set up in Mauritius and Cyprus to raise overseas debt of $950 million for the Bumi acquisition. Most of the debt, he added, will be raised by the Mauritius subsidiary. According to Menon, International Finance Corporation (IFC) and Asian Development Bank (ADB) have approached the company for a stake in the 4,000MW Mundra power project. “We are planning to hold 100% equity in Mundra for the moment but we are negotiating with them for loans,” Menon said.
Tata Power has a total projected requirement of 21 million tonnes of coal annually, of which 50% will come from the Bumi mines. The company is scouting around for additional coal in Australia, Madagascar, South Africa and Indonesia. However, Menon said that the company was not keen on buying equity and may just settle for an off-take arrangement (with a coal supplier).
Tata Power expects to complete the financial closure for Bumi deal by June this year. Coal from Indonesia will start coming in from 2009-2010 when the Mundra project is expected to become operational.