Coastal Gujarat Power (CGPL), a wholly owned subsidiary of Tata Power, has completed refinancing of its outstanding external commercial borrowings (ECBs) of $770 million or Rs 5,500 crore. The development is expected to help the cash-strapped company reschedule its cash requirements.
The refinancing has been done through a mix of rupee denominated debt instruments and equity funding from sale proceeds of non-core assets, the company said in a statement.
“The refinancing of dollar loans of CGPL will help in rescheduling the cash requirements as well as reduce the effective interest cost, apart from reducing foreign exchange-related volatility for CGPL,” the company said. It did not disclose the rate at which refinancing was done.
This is also expected to ease cash flow burden resulting from the continuing losses due to under-recoveries in the Mundra ultra mega power project (UMPP).
The subsidiary suffered a loss of Rs 432 crore in the April-June quarter of 2018, compared with Rs 309 crore a year ago. The Mundra plant is said to have an under-recovery of Re 0.92 per unit and an accumulated losses of Rs7,000 crore in seven years of operations. Tata Power’s gross debt is around Rs 48,589 crore at the end of March quarter, which it plans to reduce to less than 40,000 crore in coming years through non-core stake sale and bring the debt-equity to 1.5 times from 2.5 times at present, said analysts who attended the Q1FY19 earnings call.
Tata Power’s Mundra unit has been making losses due to a mismatch between the tariff offered through the power purchase agreement signed and the cost of production. Costs to operate the Mundra unit escalated following an unexpected change in Indonesia’s coal export policy. The Mundra unit was to be fuelled using coal imported from Indonesia.
Praveer Sinha, CEO and managing director of Tata Power, said: “We have been looking at various options to improve the viability of the Mundra UMPP. This is one more step in the same direction as it reduces interest cost burden and cash flow burden on CGPL.”
The 4,000 MW UMPP in Mundra is also looking for a suitable solution by either raising tariffs or selling equity in CGPL.