Private power producer Tata Power posted a lower than expected consolidated net loss of Rs 83.8 crore in the second quarter of the current financial year as against a loss of Rs 1,187 crore in a year ago period. The company’s consolidated net sales increased 17.8% to Rs 7,399 crore from Rs 6,282 crore during the same period.
Anil Sardana, MD of Tata Power said their coal production in the second quarter was above 19 million tonne and they are looking at much higher sale volume in Q3. He further added that coal prices have been keeping low and at present, they are adequately placed for domestic coal sourcing. However, Mundra will continue to face challenges on a PAT basis, opined Sardana.
Going forward, Sardana hopes to see better margins in the third quarter. He also maintains the sales guidance of 70 million tonne.
Below is the transcript of his interview on CNBC-TV18
Q: Your coal volumes and the lower coal sales were the biggest disappointment this time around. What is the outlook going forward? Are you expecting this trend to continue?
A: Specifically talking about the coal realization, let me suggest that in Q2 the coal production was higher. In fact, we could do about more than 19 million tonne. However, the sales were restricted to 15 million tonne. This was for a simple reason that the coal could not go upto the port side. They had some difficulty in the conveyors. But fortunately the production was already done. Therefore, in the coming quarter, we would be able to do much higher sales.
I had made this point before that we had upgraded the facilities. Today the place is capable of doing upto 80 million tonne per annum and that is a large volume. So, more than 19 million tonne production clearly suggests that now we are well on our target. This coming quarter, we would be able to do higher sales.
The coal prices had been low. We had close to about USD 83 as the price of coal at the rack rate. This is much lower than the prices which were prevailing in the previous quarters. So, considering that we have now shifted to mining which is not deeper. Therefore, we are increasing our margins and in the coming quarters you would see improved margins.
Q: There is also a lot of talk in media about you looking at alternative when you have to source coal. How much do you think that will help? Have you made any progress on that front?
A: As far as Tata Power’s coal requirements are concerned let us divide that in two parts; one the imported coal that we source for our plant in Gujarat, Mundra and our plant in Maharashtra, which is Trombay. We do not see any difficult, in fact both the places are comfortably placed with coal sourcing. As far as our domestic coal requirement is concerned, for Maithon and Jojobera, we do not have difficulty. There we are getting our full coal requirements.
Q: Is the company on track to fulfill its guidance for a volume ramp-up up to 70 million tonne per annum for FY13? How much has the company done until now on a year to date (YTD) basis? Do you plan to hold up your guidance?
A: The sales till now have been close to 32 million tonne. The guidance with regard to 70 million tonne still stays. We are comfortably placed in terms of our sales from mining companies.
Q: While last quarter the Mundra plant contributed positively to the EBITDA line, this quarter again the plant has made a loss. What was the problem and when can we expect the performance to stabilize and perhaps even turnaround for Mundra?
A: Mundra plant is contributing positively to EBITDA and for H1, it has contributed in positive terms. It has been one of the very stable units. Immediately after synchronization it has gone into a tremendously stable mode.
We are very satisfied with the way Mundra is responding. As far as the prices are concerned, we are already in CERC and our petition has been admitted recently, we are looking forward to a discussion and a debate on this aspect commencing first week of December.
For Mundra, it is to be understood very clearly that on a PAT basis, Mundra will continue to have a challenge for the reason that coal prices are not getting reflected in the variable cost. It is built before our contracts in Indonesia were reneged and therefore, we do not get the discounted coal. We have to pay the full market price and that is the reason why we have gone to CERC.
As far as the performance of the plant is concerned, it is very good. There is a second element, we have done impairment to the tune of Rs 250 crore last quarter on Mundra and that is what reflects in the negative number that we have seen. This is another provision in addition to Rs 1,800 crore impairment that we did last year.
Now the impairment stands upwards of Rs 2,000 crore already and that problem will continue in accounting terms till such time that we have a solution from CERC.
Q: Do you think December 4 will yield some material?
A: CERC details are there in public domain and have admitted our petition last month. They have given time to beneficiaries to respond and have said that from December 4 onwards they will start hearing it on a continuous basis. One has to hope and see how this whole thing pans out. There is a likelihood that the beneficiaries and us will have to further get on the table to see how the best solution can evolve and it is a win-win situation for both sides.
Q: Are there any chances that this matter will undergo litigation and be decided by the Supreme Court?
A: As far as CERC is concerned, that itself is a court. It is equivalent to the High Court. Therefore, you can always assume that the matter is already in the court. Maybe it is different that it's in a court which is related to the domain.
As far as the CERC adjudication process is concerned, it is very much a process which is like any other judgment. The entire issue of judgment and adjudication is akin to being in the court. I am sure if a domain related court decides on a matter and there is a decision, then generally both sides will typically accept that.