Praveer Sinha on Tata Power growth in coming qtrs

“There is a great opportunity for India to leapfrog into the space of smart grid and smart metering and we expect the way the power sector has been working, especially the state’s discoms, will go through a change in terms of management, services and a lot of money will get invested in those areas,” says .Praveer Sinha, CEO & MD, Tata Power.

Q4 numbers showed a solid realisation as far as the coal business is concerned. What is your outlook for the coal business over the next couple of quarters?

We have solid numbers not only for the coal business, but also for all our existing operations. Our power generation has been much better than the last few quarters. Our transmission and distribution (T&D) and renewables have done very well also. All our renewable plants have been generating at a very good capacity, including the wind portfolio which earlier used to have a challenge; they have done exceedingly well in this quarter.

Overall we have done very well and every one of the businesses have supported the overall profit that has come. What is important is the consistency with which we have been showing growth. This is in fact the 11th consecutive quarter in which we have shown a PAT growth and we expect that to continue because the operations have stabilised, a huge amount of improvement has come in our operations and cost efficiency and all those benefits are accruing today. We expect in future quarters, similar trends will be observed.

Given the spike in coal prices coupled with the ESG focus, is there any plan to offload any stake in the Indonesian JVs?

We continue to examine all these things. It all depends on what sort of valuation one would get as there was a licence renewal in December and based on the new licences, we have a 10-year mining licences which can be extended by another 10 years. Our coal operations are going well. At the right time, we will look at the opportunity but this is something that we keep on observing and monitoring on a regular basis.

As I look at the fine print of the EPC business, both Solar and Tata Projects reported a loss. What is the outlook on profitability from here on and when are these businesses going to turn around?

Tata Projects had a negative impact last quarter as well as in this quarter because we look at it from a long-term perspective vis-a-vis the cost to completion. We made a provision for losses in the last quarter as well as this quarter considering the type of projects that we had and in some of the projects, there was a little bit of stress.

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Going forward, we do not expect any further impact on what they are implementing in Tata Projects. We have also looked at it from a perspective that as the cost of commodities have come down, we are in a much better position to handle it and going forward it should be making profit. Similarly, on the EPC for renewable last quarter, we were expecting the prices to soften based on the various reports that had come from China. Unfortunately, the prices have not come down because the Covid impact continues to be there in a few places. Similarly, we had a huge challenge in terms of the forex losses and the increase and the devaluation of the currency adversely impacted us.

Now that we have done 100% hedging for all future procurement, we would not have any similar position in future and we will be able to address this.

On the renewable business, you have announced a capex plan of about Rs 10,000 crore for this year. What is your expectation in terms of growth in this vertical given that PAT has been a bit volatile?

We have a huge plan and this year our capex is a total of Rs 14,000 crore, out of which, majority of nearly Rs 10,000 crore goes for our renewable business. This will be both for the utility scale projects that we are implementing and they are all in the pipeline. In fact, in the first quarter itself, we commissioned nearly 250 megawatt and another similar capacity commissioning is happening now. We expect that this year we will add another 500 megawatt of projects. Apart from that, we will also be setting up the manufacturing facility with the investment of nearly Rs 3,000 crore. All put together, the Rs 10,000 crore investment that we will be making will help us to further improve our power generation capacity and that will also enhance the overall capacity of the company.

Yesterday we saw that important announcement from the Competition Commission of India which has blessed the Blackrock deal as well as Mubadala investments. Now that approvals have started to come in, when can it close and when will we see the money come in?

This was the last of the pending approvals. Now that it has come, we expect to complete all the transactions in the next two weeks and the first tranche of money can be expected by then. The second tranche will come six months thereafter. We are very much on track to complete this transaction and carve out a separate company of Tata Power renewables which will implement all the renewable related businesses green businesses.

This is a larger trend that we are seeing across corporate India. In fact to be fair globally as well, how new subsidiaries are being set up for renewables, for greener energy, the ESG barriers are being met, ESG allocations of funds are also met. So after you carve it out, how independently will it function? Will there be more capital raising? Can it be listed separately?

Well right now whatever divestment we had to do, we have done. The money that will come will be adequate for the growth for at least next two-three years and based on how the market reacts to this investment as also the opportunities that come in future, especially considering that last week only the Government of India announced the revised RPO obligation going up to 47% by 2030, there will be a huge opportunity for us and we will be a big player in the renewable business going forward.

When we talk about investments in power, where do you see the capex picking up? Will elevated prices and demand for better power continue to keep capex in the sector going across various players?

The power sector has been growing in the last few years, especially in the last one year and the demand has gone up by nearly 25%. There is a great opportunity for the Indian industry and for India to leapfrog in the renewable space. India has taken a very ambitious target of 500 gigawatt by 2030. The RPO obligations are there and that would mean that there would be huge investment in renewable space.

When I talk about renewables, it is not just solar or wind but the whole lot of renewables systems that would be there including storage and hydrogen. There would be a huge opportunity in the decentralised usage of renewable– that is rooftop and solar pumps. There would also be huge penetration of electrical vehicles.

I think there is a great opportunity over there to cater to this requirement. A lot of transmission system needs to be upgraded and so there will be large investments in the transmission business. Similarly, the distribution system has to become smart and the smart metering programme of the government as also improvement in the distribution system, both in terms of reliability as well as customer service, will be a very important thrust. I think Tata Power is very well poised to benefit from all these areas where opportunities are coming and one would see substantial growth in Tata Power in the coming quarters.

Can you talk to us about the distribution business as well? What does all the amendments that we have seen in the Electricity Act, mean for that side of the business?

It means that the distribution sector has to undergo a huge transformation in terms of the quality of service that it provides to customers. There are a whole lot of changes which is happening and the customer expectation is going up. So reliability, 24×7 availability in real time, information available to the consumer, smart metering agenda, smart grid agenda – all these things will make India and the Indian consumer aware of what are the latest technologies and the benefits of utilisation of energy.

There is a great opportunity for India to leapfrog into the space of smart grid and smart metering and we expect the way the power sector has been working, especially the state’s discoms, will go through a change in terms of management, services and a lot of money will get invested in those areas.

Roy Walsh

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