Tata Power loses Rs 30,000 cr equity investment on expensive coal

Tata Power, which is seeking higher tariff for electricity generated from its 4,000 MW Mundra UMPP, has so far seen erosion of more than 60 percent of the Rs 4,500 crore equity investment in the project, according to sources.

“The company has already lost around Rs 3,000 crore of equity investment in the Mundra project since it started power generation in March this year, due to expensive imported coal,” a source in the know said.

Coastal Gujarat Power Limited (CGPL), a wholly-owned subsidiary of Tata Power, is implementing the Mundra project in Gujarat. The first 800 MW unit started generation in March. The flagship UMPP-estimated to cost about Rs 17,000 crore -is being funded in the debt-equity ratio of 75:25.

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[caption id=“attachment_482032” align=“alignleft” width=“380”]  In recent times, the price of international coal has dropped to around $100 per tonne from $120 per tonne. AFP[/caption]

The country’s largest private power producer has already approached the Central Electricity Regulatory Commission (CERC) seeking higher tariff, which would help to mitigate losses arising out of pricier imported coal.

According to sources, the annual loss from the Mundra Ultra Mega Power Project (UMPP) is estimated to be around Rs 1,800 crore unless the tariff is hiked. “Unless the tariff is hiked, the overall equity could get eroded in less than three years from now,” the source said.

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Even though, the international coal prices has fallen on account of sluggish demand globally, the company continues to incur losses on the Mundra project. Sources noted that in the wake of fall in imported coal prices, the loss per unit of electricity generated has slightly come down to around 67 paise, while earlier, the same was around 70 paise per unit.

In recent times, the price of international coal has dropped to around $100 per tonne from $120 per tonne. Tata Power bagged the Mundra project through competitive bidding by quoting an electricity tariff of Rs 2.26 per unit.

But higher imported coal prices have made the UMPP unviable at this rate. The company is seeking an hike in tariff of about 0.70 paise per unit. Mundra project has five units, each having 800 MW capacity and two of them are already operational.

Power generated from Mundra UMPP is to be supplied to five states-Gujarat (1,805 MW), Maharashtra (760 MW), Punjab (475 MW), Haryana (380 MW) and Rajasthan (380 MW). On September 27, CERC held an hearing on Tata Power’s petition related to Mundra project.

“Formal hearings will commence soon after respondents (procurers) submit their responses to the petition. CGPL looks forward to a positive and an early resolution considering that its built a national resource and one of the most competitive and state of art sources of power,” the company had said on that day.

PTI