Tata Power is looking at acquiring stressed assets across the country as lack of fuel linkages is posing challenges to organic growth, the company chairman Cyrus P Mistry has said.
From being the largest private power utility for decades, Tata Power, with 8,726 MW installed capacity at the end of March, had lost the top slot last year to Adani Power, which has 10,440 MW capacity.
At the peak of project delays during the previous regime, due to lack of fuel linkages and green clearances, Tata Power had gone public.
“Due to the current financial stress in the power sector, there are assets across the country which may be available for acquisition. We are evaluating and will continue to evaluate opportunities to acquire projects in various stages of development across the country,” Mistry said in the 96th annual report of the company.
The acquisitions, if materialised, will leverage the company’s business in the power value chain, he said.
The power sector was one of the most active sectors in the domestic M&A space in recent past with Lanco and JP Associates exiting many of their stressed projects last fiscal.
Mistry said growth in domestic market has in the last few years been constrained mainly due to the uncertainties around fuel supply, financial condition of the discoms, challenges in land acquisition, water linkages and various other statutory clearances.
“We are exploring multiple options, both green-field and through possible acquisitions. This will help enhance the market share for both solar and wind based generation.
“Given the increasing difficulty of acquiring land for future capacity addition in the country, we are actively evaluating and pursuing opportunities to acquire land in strategic markets to help build a strong pipeline,” he said.
The company will also continue to focus on greenfield projects in India and abroad as well as on expanding at existing sites, Mistry said.
The Tata Group chairman however expressed optimism that the efforts being driven by the Centre are expected to ease some of the known constraints which in turn will help ease constraints for the power sector. “We are also actively advocating, evaluating and pursuing projects for solar, wind, biomass-based power plants and other formats of generation to make them commercially viable specifically for small power plants,” Mistry said.
The company will pursue opportunities in the distribution sector — partnering with states and Union Territories that have the institutional will and conviction to reform and drive operational improvement, he said.
“With growing focus on improving the state of the state- owned distribution business, several business models have been evaluated in the past. While the PPP route has been successfully demonstrated in Delhi, the distribution franchisee model has been accepted by a few states as the route to bring in private investments, expertise and management skills in the distribution business,” Mistry said.
He further said the company is actively tracking developments with respect to amendments to the Electricity Act of 2003, which might create opportunities in electricity supply business.
He further said the company is looking at expanding its transmission network in the Mumbai and Delhi license areas and is also keenly tracking any growth opportunity in the transmission sector and reviews each opportunity as it presents itself.
On the cancellation of coal blocks by the Supreme Court, he said, “subsequent to the apex court judgement our two mines — Tubed and Mandakini — got cancelled. We did not participate in the first two rounds of the coal block auction process as it concluded after a detailed evaluation that the offered coal blocks were uneconomical for our qualified end use plants.
“However, we will continue to evaluate coal blocks available in future rounds of auction”.
He further said the company will continue to evaluate investments in international thermal coal mines to meet the current and future generation growth needs.
Managing director Anil Sardana, however, said Tata Power is planning to sell its stake in an Indonesian coal mine company, but is yet to finalise the terms with bankers.
Last year, Tata Power had agreed to sell a 30 per cent stake it held in PT Arutmin Indonesia, and its associated infrastructure assets, to the Bakrie Group at USD 500 million, which was a huge discount to its buying price.
Tata Power acquired 30 per cent stake in two Indonesian thermal coal companies owned by PT Bumi Resources — PT Kaltim Prima Coal and PT Arutmin Indonesia — in 2007 for about USD 1.1 billion. The purchase was to control costs of fuel for its Mundra ultra mega project in Gujarat.