May 24, 2012, 09.23 AM | Source: CNBC-TV18
In an exclusive interview to CNBC-TV18, managing director of Tata Power Anil Sardana says that a tariff revision for its Mundra ultra mega power project is not yet a lost cause.
According to him, the change in law and prices in Indonesia with regard to coal has affected the entire sector, not just Tata Power, and so the stakeholders should “sit together and resolve this issue for the larger sustenance of the sector.”
Tata Power suffered a blow in the fourth quarter of FY12 due to an impairment provision for its Mundra ultra mega power project. The company posted a loss of Rs 629 crore, of which Rs 825 crore was the impairment provision.
The company also accounted for a one off stripping cost for one if its coal assets. “We have made full provisions for all the new mines stripping herein after, so from now on, for every tonne of coal that we produce, the corresponding stripping ratios will be written off along side in the margins itself,” he said.
Even though the company did not report any profits, Sardana says the fundamentals of the company are still strong because of its 22% jump in revenue and 24% jump in profitability. The company also reached the 25,000 crore turnover last year.
Below is an edited transcript of his interview with Sonia Shenoy and Reema Tendulkar. Also watch the accompanying video.
Q: There is a significant impact of an impairment provision for Mundra and that stripping cost for one of your coal assets on the bottomline, which have both been accounted as a one of in Q3 already. Do you think that there is a further impact likely or is this it for now in this quarter?
A: As far as the deferred stripping is concerned, that’s it for now because we have made full provisions for all the new mines stripping herein after. Now onwards, for every tonne of coal that we produce, the corresponding stripping ratios will be written off along side in the margins itself. Therefore, it won’t show up as an extra ordinary item.
In regard to Mundra, we have been making a point to say that it’s important for beneficiaries and the concerned stake holders to review the entire change in law as also the prices. Many voices have been talking about the fact that it will get neutralized with the mining earnings etc, but now it’s very obvious that it certainly comes in and impacts Coastal Gujarat Power Ltd. (CGPL), which is the owner of Mundra ultra mega power project (UMPP). Since all the arrangements that we had done in Indonesia have got impacted by the change in law there, it is only right for beneficiaries to have a review.
It’s not impacted just Tata Power, it’s impacted the other stake holders who have been running projects using the imported coal. So it’s time now that these stake holders sit together and resolve this issue for the larger sustenance of the sector.
Q: Any kind of concerns on the fundamental operations for both the power and even for the coal segments?
A: This is been a phenomenal year for performance for Tata Power. If you see it on a standalone basis, we have had jump in revenue by about 22% as also a jump in the profitability. The PAT is 24% more than the previous year even after all these adjustments on a standalone basis.
If you look at the consolidated, this is the first time that Tata Power has crossed the turnover of Rs 25000 crore. We have registered tremendous increase and from Rs 19000 crore we have moved to Rs 26000 crore of turnover this year.
Q: What is the update on seeking tariff revisions for the Mundra UMPP? Is it still on the cards or is it a lost cause now?
A: As far as our information is concerned, it is still being discussed; we still haven’t been given to understand that it can’t be changed. There is a general understanding that the stake holders have and we just want actions on those to be expedited.
We want people concerned to empathise the fact that it’s seriously impacting the sector. It is causing the existing assets tremendous despair and for those who were to build assets, they have stopped working on that. So the sector needs every bit of those assets to contribute.
Q: Could you give us a update on the operational performance at your Mundra power project and also at the Maithon facility? What have the plant load factors been like in this quarter for both of these facilities?
A: As far as Maithon is concerned, it exited Q4 with a positive PAT and its performance for Unit I, which is the one which is commercialized, has been upwards of 80%. As far as the coal issues with Maithon is concerned, we are converting the existing FSA that we saw in with BCCL into a new format FSA which is basis the discussion that is right now happening between Coal India Limited and the various government bodies.
For Unit II, we will accomplish the commercial operation date by the end of this very month. Thereafter, we would have the Central Coalfield Limited (CCL) coal for which the Letter of Intent (LoI) is already there with us, which is also going to get converted into the new FSA basis.
On the Mundra side, our Unit I has been running very well and if I see it from my morning report of today, for the month of May it’s already upward of 85% PLF. So the performance of units operational is very good; we are only looking forward to the solution for Mundra.