Tata Power to spend Rs 2,200 cr till FY19 to enhance its Mumbai infrastructure

Written by Pallavi Ail | Mumbai | Updated: Aug 29 2014, 10:40am hrs
Tata Power estimates it will incur capital expenditure of over Rs 2,200 crore till FY19 for its Mumbai operations as it enhances network and supply infrastructure, according to plan documents submitted with the state electricity regulator.

On August 15, the company was awarded a licence that extended its distribution area to south Mumbai, where previously Brihanmumbai Electric Supply & Transport Undertaking, a municipal body, had monopoly.

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Tata Power expects to fund its capex plans with a mixture of debt and equity in the ratio of 7:3. It anticipates the recently concluded Rs 3,000-crore rights issue to fund part of the capex to be incurred in FY15, according to a document filed with the Maharashtra Electricity Regulatory Commission (MERC).

The company has incurred capex of Rs 707 crore for the three fiscals till Feb 2014.

Though MERC granted the licence to Tata Power, it expressed dissatisfaction at the network rollout plan set forth by the company, saying it does not specifically prescribe the manner in which supply will be given to the lowest-consumption consumers in the licence area.

The regulator observed that the plan does not specifically cater to the past concerns of the Commission, i.e., cherry picking and supply to the lowest category of consumers. Also, it did not show the manner in which completion of laying of lines in specific areas will be completed so that it is done in a systematic manner.

MERC directed Tata Power to submit within six weeks a fresh network rollout plan addressing these concerns.

The power supply to the licensed areas of Tata Power are getting supply, under the new licence, with effect from August 16 00.01 hrs, Anil Sardana, managing director, Tata Power, said.

Under specific conditions of licence, MERC has asked Tata Power to submit a roll out plan for approval to acquire balanced set of consumers in economical manner. Tata Power will be rolling out modern network expeditiously to increase its network availability to service more than 1 million consumers on its network in a manner that it's a representative mix of consumers as exist in Mumbai, as also are there on Tata Power network, he added.

Tata Power already has a backbone network in place in South Mumbai as it used to supply power to mills in the area, which would be categorised as high-tension (HT) consumers (consuming higher loads). However, it will need to augment the network with infrastructure that specifically caters to low-tension (LT) customers (mainly residential consumers).

They will take at least five years to have a network which can serve LT consumers, a senior official in BEST said. The place is very congested and permissions are difficult to come by. As we are a local authority, under the law, they cannot use our network.

There is significant difference between the tariff charged by BEST and Tata Power, with the former charging more than three times Tata Powers energy rates in the LT category and almost 15% more in certain HT categories.

They have a better ratio of bulk consumers, which reduces their tariff. But Tata Powers capex will rise as they need to setup an LT network from scratch and their tariff will eventually increase, which will level the playing field, the official added.

The order shows that Tata Powers existing LT cable laying status is barely 5% compared with R-Infra and BESTs combined existing network. Tata Power has an LT network of 1,189 km compared with BESTs 8,200 km.

The Commission notes that the existing LT network of Tata Power is a small fraction of the LT networks of R-Infra and BEST, MERCobserved in the order. Therefore, if Tata Power is granted a licence in the proposed area of supply, it will have to expand LT network substantially for last mile connectivity even to achieve servicing 50% demand as envisaged in its business plan.

Tata Power has cited issues in laying down its network. It said that it made 2,309 applications till March 31 to various agencies to gain permission for digging and laying down of network, out of which 76% are still pending. In one of

the annexures submitted with the licence application, the company said it needs clearances from 16 agencies for undertaking transmission works.