"We expect that the coal prices will come down over a long period of time especially considering that the world over coal-based plants are shutting down," said Praveer Sinha, Managaing Director and Chief Executive Officer, Tata Power.

Sinha said, "There is definitely an opportunity that the coal prices will come down because the demand of coal will reduce and I look at an opportunity whereby we will be able to reduce the cost of production and to that extent reduce the loss."

Edited Excerpts:

59 gigawatts worth of power projects are currently under stress now. What do you see as the fate of this power projects? Any buyers, big haircuts that banks would have to take?

What we see is that many of these power plants do not have full power purchase agreements (PPAs) or do not have fuel supplies so those are challenging because until and unless you have PPA, which ensures take or pay obligations, people would be averse to looking at these projects.

It is important that some of these projects have PPAs tied up. They also get the fuel supply tied up and then only they become viable for anyone to look at them seriously.

Watch: Will look at selling other non-core businesses as well, says Tata Power

Some of these plants will perhaps come as they will come with 50-60% , 70% loan haircuts will Tata Power be a buyer if you got it that cheap?

We look at many of these investment opportunities and we always keep on scanning the market if there are good opportunities. As I mentioned to you, we are definitely looking at those projects which have full PPA tied up.

Those are not coming to the National Company Law Tribunal (NCLT). What is coming are 20,000 megawatts with PPA. But if the loan is completely knock down to 30% of current would that still be an attractive proposition?

We also look at what sort of tariff those projects will have and where those plants are located and what sort of technology they have. So, there are large number of filters that we put on them, whether they are environment friendly, sustainable in the long run or what is the capacity of those units are?

You sound like an interested buyer?

We definitely look at all investment opportunities if it comes. But definitely, merit of the cases determines whether we will look at them seriously and go forward.

What is the way forward now for Mundra because one thought after Gujarat polls perhaps that outcome would be out? Nothing out on that yet on shutdown or selling it back? Your thoughts on that?

When we have a project, we look at it from multi dimensions. We do not look at it that it has only one solution. So, there are certain things that we keep on doing internally in terms of how do you reduce the operational cost? How do you reduce the financing cost? So some of those aspects we are looking.

We are also talking to the government and see that today the plant produces at 80% because if we produce more, we lose more money. So is there an opportunity for us to produce more quantum of power and additional quantity gets sold at the market rate so that we do not have a hit on them.

So, that is an option that we are looking, other ancillary services we can do. So what I can tell you is there are number of options that we are looking with the government and while some of them we will do internally and optimise our cost, the rest of them we need the concurrence of the buyers of power the five distribution companies.

The losses have gone up this quarter so can we expect that to continue over the next few quarters?

The losses are depended on the cost of coal, so it is the variable cost which goes up. What we have seen in last one year that the coal cost have been going up and that is the reason the loses went up.

We expect that the coal prices will come down over a long period of time especially considering that the world over coal-based plants are shutting down. In Europe, many of the plants are shutting down, in Germany 20-22, all the coal- based plants will be shut down so also in US.

There is definitely an opportunity that the coal prices will come down because the demand of coal will reduce and I look at an opportunity whereby we will be able to reduce the cost of production and to that extent reduce the loss.

So putting together all the operating efficiencies that you have planned and going by the demand because merchant power rates are going up looking at the short-term increases in merchant rates, for FY19 what do you think is the likely operating loss in Mundra and what is the likely EBITDA for the entire Tata Power projects?

At this stage, I don’t have the numbers of the likely losses or will we be in the positive.

Directionally can you?

We definitely expect that it will reduce over a period of time because of the internal efforts that is being made and I think all these benefits will accrue in terms of the loss reduction that will happen.

How do you plan to reduce the losses at Mundra, what are the steps that you are taking?

We are looking at optimising our Operation and Maintenance (O&M) cost, optimising the financing cost, maybe get an opportunity to sell the additional power at a market price. So, some of these are still work in progress. So at this stage, it is still little premature to give any direction but yes, I am expecting that it will reduce.

We also keep on looking at different qualities of coal, do blending of coal to a large extent and also keep on buying coal from other sources apart from Indonesia. So, there is definitely a game plan and we are working on all those areas simultaneously to see that there is a reduction in the losses in the coming years.

How much of your money comes from defence and therefore what is the revenue loss because of the defence business that you have sold to your group companies?

The defence business as such was a very small business on the total of Tata Power balance sheet and that business was not giving us this type of synergy that is required with Tata Power business. That is why we thought that it would be proper that in the group, one of the companies, which has focus on defence business, we move this business so that they have scale and they are able to meet the requirement of the market.

How much of it has helped you deliver?

Over a period of time, we will get something like Rs 2,000 crore but this is linked to certain orders coming and those aspects have to be taken care of.

What about other non-core assets, anything else that you can sell?

We have already sold Tata Communications and that is there. We also keep on looking at some of the other known non-core activities that we have.

Like?

We have a stake in Nelco or we have a stake in Tata Projects. So these are opportunities we keep on looking at. At the right time, we will take a call whether we would like to divest or we would like to continue, depending upon how they perform and what sort of returns we get as a promoter.

What about the renewables business, little more on growth there whether any kind of investments plan, what are the plant load factors (PLFs)?

Renewables is a focus area for us and we are looking at expanding in renewable space especially in solar. The PLFs have been good in last two years. We have seen that it has gone to about 21% and we expect that as we move forward with the new technology coming in, we will be able to do further improvement in the PLFs and also in the returns in renewable business. So that is a core area that Tata Power is looking at and I am sure in the years to come, we will become the biggest player.

What is your total debt now and how much might it be at the end of FY19?

In terms of the total non-coal business that we have, it is about 2,300 megawatt. Out of which solar is about 2,200.

What is your total loan and how much is it now and how much will it be at the end of the current fiscal?

We are about Rs 47,000-48,000 crore and we expect that with the deleveraging that we are doing especially selling off the non-core assets and some of the other receivables that we are expecting from our investment, we should be in the range of about Rs 40,000-42,000 crore.

First Published:May 8, 2018 3:44 PM IST