No clarity on resolution for CGPL's Mundra plant issue: Chandrasekaran

Tata Power Chairman N Chandrasekaran on Thursday said despite extended talks with five states, the company has no clarity on resolution for issues at its Mundra plant.

The firm's subsidiary Coastal Gujarat Power (CGPL), which operates a 4,000 MW imported coal-based plant, has been in talks with discoms of Gujarat, Haryana, Rajasthan, Punjab and Maharashtra for pass-through of higher coal prices.

In his address to the shareholders during Tata Power's virtual annual general meeting, Chandrasekaran said the company is currently grappling with a few issues and is taking steps to resolve them.

"...CGPL at Mundra continues to be a drag on the financials and will likely require further support. While a number of discussions have happened with the five state government procurers, it is unfortunate that we do not yet have clarity on a resolution. However, for now, we see some relief from lower coal prices," Chandrasekaran told the shareholders.

"The plant is a Rs 24,000 crore investment including Rs 10,000 crore loss funding," he added.

CGPL has inked pacts to supply 1,805 MW to Gujarat, 760 MW to Maharashtra, 475 MW to Punjab, and 380 MW each to Rajasthan and Haryana.
Chandrasekaran further said the company has taken a few initiatives that would bring down the debt to Rs 25,000 crore by the end of the current fiscal from the existing over Rs 43,000 crore.

"By fiscal 2017, Tata Power had reached a gross debt figure of close to Rs 49,000 crore. We decided to focus on reducing this leverage by half. In March 2020, the company's net debt was Rs 43,559 crore. We have a clear plan to achieve our target by the end of this fiscal year," he said.

Elaborating on the plans, he said the company will complete the balance non-core asset sale and raise nearly Rs 1,500-2,000 crore during this year.

"We have already announced the restructuring of our renewables business by transferring it into an InvIT. Subject to your approval today, Tata Sons will inject Rs 2,600 crore in preference equity.

"With these measures, we will end this year with a debt of around Rs 25,000 crore...bringing down the debt to equity ratio of the company to close to 1. This will also move the net debt to EBITDA ratio to closer to 3, significantly strengthening our balance sheet and lowering financing costs," he added.

The company is also cutting through its complex structure and sub-scale operations, Chandrasekaran said.

"During the last two years we have exited our telecom and defence investment, South Africa wind and shipping assets and have raised over Rs 5,000 crore so far to shore up the balance sheet. We continue to work on divestment of our remaining non-core assets in coal and overseas assets," he added.

During FY2020, the company reported consolidated revenues of Rs 28,948 crore, compared to Rs 29,984 crore in the previous fiscal. Profit after tax was Rs 1,316 crore (including exceptional gains of Rs 85 crore) as compared to Rs 2,606 crore earlier (which included exceptional gains of Rs 1,332 crore), largely on the back of lower power demand, lower coal prices and delay in solar EPC projects due to safeguard duty and Covid-19.

He further said the company will focus on building scale into its new consumer-facing businesses like EV charging, microgrids, home automation, consumer roof top, among others.

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