Tata Power is eyeing a number of power projects abroad, including in Africa and Indonesia, as India?s largest private power producer looks to chart its expansion at a time when high costs of imported fuel have hit its domestic power business.
The company, a part of the salt-to-steel Tata Group, is eyeing a slew of hydro projects in Africa and bidding for projects in Indonesia, where it already has interests in coal mines. ?
?We?re mostly looking for small projects of around 200 MW in the hydro space,? a top Tata Power official told the FE. ?The areas we?re looking at include Zambia and South Africa. The projects will cost around $1.5 million per MW to set up,? he added.
At $1.5-1.75 million per MW, a 200 MW project will cost around $300-350 million. Tata Power has turned to building its overseas generation portfolio as losses pile up at its domestic power business.
In India, the company has so far been unable to pass on increased fuel costs to customers.?
Fuel costs rose sharply after Indonesia changed its tax laws, while law changes in fuel exporting countries such as Australia and South Africa also pushed up coal prices. Long-term power purchase agreements the company entered into when it won bids for power projects in India didn?t account for the increase in fuel costs.
In a recent order, electricity regulator CERC awarded the company and peer Adani Power, which has also grappled with similar issues, compensatory tariffs to account for increased fuel costs. The order was seen as a major relief to the power producers, but there is still no clarity whether a panel formed by the CERC to decide on the quantam of the tariff hike has submitted its report. The panel, headed by HDFC?s chairman Deepak Parekh, was supposed to submit its report on Tata Power?s tariff hike by May 15.?
Tata Power has already invested in a number of ventures overseas. It recently agreed to team up with Clean Energy Invest (Clean Energy) and IFC InfraVentures (IFC) to develop 400 MW hydro projects in Georgia for sale of power primarily to Turkey. The total project cost is estimated to be about $700 million (or $1.75 million per MW). It has invested in Bhutan, where it has built the 114 MW Dagachhu hydel power project.
The company along with consortium partners Australia?s Origin Energy and PT Supraco Indonesia is also developing the Sorik Marapi geothermal project in Northern Sumatra, Indonesia. Heavy investments in domestic projects over the past few years have also resulted in a hefty debt burden. The company may rein in domestic capex over the next couple of years as it looks to reduce its high debt levels. ?
?Ideally, electricity is a domestic business, not an international business and we?ll be very happy to invest in India once the policy-related issues are resolved,? the official said.