‘We took our Delhi example to Odisha, made it a success’
9 min read . Updated: 01 Mar 2023, 12:44 AM IST
PremiumGlobally, power consumption goes up by 1-2%, in India we used to grow 3-5%, but this year, consumption might grow by 10%, says Praveer Sinha, MD & CEO, Tata Power Co.
Tata Power needs to have a mix of regulated and non-regulated business, said Praveer Sinha, managing director and chief executive officer Tata Power Co, in an interview. The company pulled off a major feat by turning around the four Odisha discoms through public-private partnerships, and is now eyeing more opportunities in this segment, he said. Edited excerpts:
The government expects power demand to go up. The power ministry could invoke section 11 of Electricity Act, to direct thermal power generators, using imported coal, to operate at full capacity between 16 March to 15 June. Will it help meet peak power demand this summer?
In the last two years, the demand for power has gone up tremendously after the pandemic. Earlier, in summers we would see consumption of 170-180 GW and in the winters about 150GW. Last summer, it was at 210GW and this winter, it was up to 206GW. In winters, we never crossed 160GW earlier. So, this summer the projected consumption is 229 GW, but I think it will possibly be more than 229GW at peak power requirement. And that means 10% growth, which is very rare globally.
One can attribute it to a lot of industrial activity, and in manufacturing that missed out during covid, commercial activity including offices and shopping malls. There is also a lot of residential consumption taking place and we also see the full impact of the government’s efforts to electrifying villages.
Globally, power consumption goes up by 1-2% and in India we used to grow 3-5% in different parts of the country. This year and last year, we find that the scope is much higher here, especially in the summer months. That’s why to take care of this requirement, Section 11 is imposed to ensure that not only all existing domestic coal-based and gas-based plants and renewables, but also many coal-based plants that were struggling to operate because of high cost of international coal, may be able to operate and get pass through of the coal cost because in the overall basket it will not be a very large amount in terms of tariff increase.
What is the capacity utilization of the Mundra power plant?
When we ran Mundra from May-December 2022, we ran it at 85% capacity, that was also Section 11. But currently we are not operating the plant.
So, in that sense Section 11 will help restart Mundra thermal power plant and allow you to earn revenues from it?
Absolutely. So, the whole purpose of section 11 is that it should become cost reflective and whatever is the actual cost of coal and shipping and unloading and insurance, we will get a deal to that extent.
Tata Power saw a major makeover by transitioning from a pure-bred utility company to becoming more consumer centric. Investors acknowledged this as well with the re-rating of the company. Can you elaborate on the future course of expansion?
We need to have a mix of regulated and non-regulated businesses. Earlier, most of our business used to be a regulated business but now we are trying to have a good division between the two. Regulated business are the long-term power purchase agreements. We have the distribution business, which is again, a very regulated business, where you get a return on equity on the capital invested and certain incentives if you perform better than the benchmark. So, what we said is that we will do both types of business because both of them have their benefits and it insulates us and de-risks us from some of the market challenges that we face.
We looked at our distribution business, we have done very well in Delhi, where we had brought down the losses from 53% to now less than 7%. And we said that based on our experience and our domain knowledge, can we do this in other places. We went to Odisha, and we took all four DISCOMS. Delhi was less than 2 million customers, Odissa has more than 9 million. So, in one go we went to Odissa during covid period, but we were able to make a huge transformation. It also benefited the state, and the government is able to demonstrate how a public private partnership is able to give better results to the people of this state. The losses they were incurring have virtually been eliminated. For us, for the work we do, we get a return on equity and incentives.
I think it’s an arrangement which has benefited everyone. Having said that, we have proven ourselves in Odissa because everyone said that Delhi is an urban experience, and it will be difficult to replicate in rural areas. Now, we have demonstrated in a rural ecosystem also. And based on that experience, we now feel confident that we can go to any state in India. Now that there is a lot of discussion that is happening de-licensing distribution, there’s a lot of talk going on in multiple supply licensees and we feel we can go to a large number of cities. We’ve identified 50-odd cities we will go to and will pitch for multiple licences. That’s the nature of work we are looking at. It will be one of our biggest growth areas.
What’s your outlook for the transmission and renewables businesses?
In between, we were not doing a lot of transmission projects. Now we are going into many transmission projects which will be set up for renewable power generation in certain pockets where you have high solar intensity and then bring it to the other parts of India in terms of providing the availability of energy indoors. We will put all the renewables into one specific special purpose vehicle, and will be working right across from manufacturing to EPCs third party to large utility scale from solar plants.
And over the last few years, we have increased from a very small capacity to 4000 megawatts of operating assets today. And there’s another 300,000 megawatts which is under different stages of construction. So, these become 7000 megawatts in the next maybe 12 to 18 months’ time on a staggered basis. So, I think there is a huge demand and opportunity that we see in renewable space.
Q6. Can you elaborate on Tata Power’s plans on the manufacturing side?
We have this manufacturing unit for cells and modules of about 500 odd megawatts and 500 megawatts respectively. Now, we are adding another four giga watt so 4000 megawatts of cell and 4000 megawatt of module manufacturing at our new facility in Tamil Nadu, which will become operational in this calendar year. So, I think you will see a huge amount of growth that will happen in renewable in each of these utility scale, third party PC, manufacturing, rooftop solar, solar pumps and then some of the new business-like EV charging.
In terms of EV charging, we are the biggest in the country and have more than 50% of the market share. So again, we will have a leadership role in many of these.
Q7) Is it time to decouple some of the businesses as they are reaching a scale? Your peer has done it, by having a separate transmission entity and for its renewable business?
Ans- Let us bring in more scale, right now it is too premature. Let us have the benefit of synergy of one single entity and leverage the strength of it. Our cross learning within the company is helping us to achieve much better performance and have the flexibility of bringing people, practices processes from one business to another. Today we have having seven gigawatts of renewables, So we need to bring it to scale maybe 15 or 20 GW. Similarly in renewable and distribution. We have 12 million customers, maybe 50 million customers is a good scale. I think what is important is for us to first build solid businesses, scale it up and then look at it in any other way.
Q8) But Tata Power is growing fast and set ambitious targets. You plan to grow five times the current capacity in the next 3-4 years. But are high multiples that Utility businesses are given justified?
Ans- We were not even 2.5 million customers and in one go, we added 9.5 million customers So we became about 13 million customers. So, nothing prevents you from growing. We did this during covid year where everyone said how can you grow in this year and take a new distribution company? We were working in Delhi; the area was 510 square kilometers. The whole Delhi area is 1500 square kilometers we went to Odissa which is 150,000 square kilometers. So, can there be a much bigger growth than this? Wherever there is a good opportunity, we will grow.
Q9) Would you look at assets like D.B Power, which have returned to the selling block?
Ans-I have not seen the details. Let me get it examined.
q10) With the main suitor no longer keen on PTC, is this an opportunity for Tata Power?
Ans- We keep examining various companies based on what is their business model, what is the intrinsic value, what area of business and does it have value with us in terms of our growth plan. So, if there is something which has value that means our growth plan, objective those are the type of things we look at.
Q11) Is Tata Power looking at divesting businesses?
We divested PT Arutmin nearly six years ago. We’ve got about $ 400 million and $40 million should accrue this month. We divested our shipping business, and our business in South Africa. We will divest some of the other investments outside India like in Zambia and Georgia. The whole objective of divestment is that we should get better value for investment for our shareholders.
Q12) Is there any plan to maybe park the EV charging business with the Tata Motors company?
Ans-EV charging is a business that is being developed by Tata Power. Charging is a standalone thing. It caters primarily to Tata Motors because Tata Motors has more than 80% market share, but other vehicles can also charge. It’s agnostic of the make of the vehicle. And to that extent, it’s a very good fit for Tata Power to be in this business.
Q13) Power firms are the target of many cyber-attacks. How are you improving your company’s protection against them?
Ans-We have a state of the art, strong cybersecurity system, and we keep on upgrading it. So we keep on adding new types of preventive measures to take care of any cyber-attack.
Q14) In your renewables business, you have divested a 10% stake to BlackRock and Mubadala. Looking at your plans of scaling up, is a second or third round of funding in the offing?
Ans-So I think the purpose was that at least for next 2-3years, we should have enough money and that is why we divested 10% stake. So, for us, it is now important that we demonstrate that first and implement what we have to do in next 2-3 years and then decide what should be the next step. So, at this stage, we need to implement what we had planned and for which we have got a partner.
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