After CERC compensation, Tata Power board to consider fund-raising options

Written by fe Bureau | Mumbai | Updated: Feb 25 2014, 10:26am hrs
Tata Power said on Monday that a board meeting will be convened on Thursday to consider various fund-raising options. The company said it has not rules out any form of fund-raising option, such as equity, rights or preferential issue, qualified institutions placement or any combination.

The announcement comes barely two days after the Central Electricity Regulatory Authority (CERC) awarded Tata Power Rs 326 crore for losses suffered in FY13 along with a tariff order of Rs 0.52 per kWh in relation to its Mundra Ultra Mega Power Project (UMPP), as compensation for the unforeseen rise in Indonesian coal price since September 2011.

The compensation of Rs 330 crore matches the amount estimated by the Deepak Parekh Committee, though the compensation of Rs 0.52/kWh, is marginally lower than the Rs 0.59/kWh proposed initially, possibly due to a revision in the prices of imported coal, a report by Kotak Institutional Equities said.

Tata Powers fund-raising plan comes a month after it had reported sale of its 30% stake in PT Arutmin Indonesia coal mines for $500 million or about Rs 3,134.01 crore to the Indonesian mining conglomerate, Bakrie Group, to obtain additional funds and reduce its consolidated debt. The company had also cited its under-recovery challenges in its Mundra UMPP project as one of the reasons for the stake sale.

On conclusion of the coal assets sale in Indonesia and the compensation for Mundra UMPP, Tata Power will move back to being a pure utility with ownership in power assets without exposing itself to the risk of volatile prices, Kotak wrote.