Renewable portfolio will show results in 12-18 months: Praveer Sinha, CEO & MD, Tata Power

Praveer Sinha, CEO and MD, Tata Power Company.

Praveer Sinha, Chief Executive Officer and Managing Director, Tata Power, in an exclusive interview with Moneycontrol spoke about the company’s plans to set up pumped hydro-storage projects and starting an 8-gigawatt (GW) solar cell and module manufacturing unit by December. He emphasised that Tata Power’s focused business plan has helped in its consistent performance and that its renewable portfolio will start showing results in the next 12-18 months. Sinha stated that gauging the current power demand, the peak consumption during the upcoming summer may even cross the government’s projection of 230 GW. Talking about the company’s divestment strategy, he said the long-pending disinvestment plan of its hydropower plants in Zambia and Georgia will be cleared in FY2024.

Edited excerpts from the interview.

Take us through Tata Power’s results for the December quarter. What are your plans for the coming fiscal?

Even if you look beyond the Q3 results, you will find that Tata Power has consistently been performing very well. In this quarter, our profit has grown nearly 90 percent. Even in the last nine months, on a year-to-date (YTD) basis, our profit has grown by 90 percent. Similarly, the revenue and earnings before interest, taxes, depreciation, and amortisation (EBITDA) has also grown. This is the 13th consecutive quarter in which Tata Power has done well and has increased its profitability. This has been done through a very focused business plan and long-term strategy, wherein we said our existing operations ― coal and hydro plants ― will do very well. We decided that we will maximise generation from all these plants, improve operational efficiency, and reduce the cost of generation. We have started seeing the benefit of this strategy in the last two-and-a-half years.

Secondly, we also said that we will try to make our Mundra (imported coal-based) power plant cost-reflective. Fortunately, under Section 11 (of the Electricity Act) directions of the Government of India, we were able to operate the Mundra plant with a cost-reflective tariff. So, whatever we were incurring as a cost for generating power, was being reimbursed to us. Going forward, this will make our performance in Mundra very consistent.

The other businesses like transmission and distribution (T&D) have also done very well. Our performance in Odisha discoms, which we took over two-and-a-half years ago, have started showing results. We have been able to reduce the AT&C losses in our Odisha distribution utilities from a range of about 35-40 percent to nearly 20-22 percent. Next year, we will bring it down, to much lower than 20 percent.

Our renewable business has done well too. We have nearly 4 GW of operational solar and wind plants. And there's another 3 GW which is under implementation, and in some cases, we are expecting the orders. So, there will be huge improvement in our utility scale performance in the next 12 to 18 months.

We also expect our renewable portfolio to start showing good results in the next 12-18 months. Our other businesses ― EV and energy services ― also will start showing good results during the same period. Tata Power has consistently performed very well. And as we move forward, it has a very good roadmap for improvement. It is not a one-off thing.

Union finance minister in her Budget speech on February 1 mentioned that a policy for pumped hydro storage projects is on the anvil. Does Tata Power have any plan to get into this segment?

Oh yes! Absolutely! As you are aware, we already have hydropower plants in our portfolio (three in Maharashtra). We are looking at converting each one of these into pumped storage plants also. So, this is something which is a work-in-progress, and hopefully in the next few months, we will start the construction activities of all these pump hydro projects. We are waiting for the Centre’s policy too. Many state governments are also coming up with hydro policy.

Could you give us an update on Tata Power’s upcoming solar cell and module manufacturing units?

Tata Power has been manufacturing solar modules, but not in a big scale. Nearly 580 megawatts (MW) of solar cell and modules manufacturing is being done by Tata Power in Bengaluru as on date. Now we are in the process of setting up a 4-GW solar cell and a 4-GW solar module manufacturing facility in the country. We expect the modules to start coming out from the plant by August-September this year, and the solar cells by December 2023. So, both the cell line and the module line implementation are in full swing, the construction activity is going on at the site, and all equipment has been ordered.

We do expect by the end of this financial year that these plants will stabilise and will be able to give us nearly 4 GW of modules, which we can use for our own plants. We have larger ambitions to set up a huge capacity of utility-scale rooftop group captive projects and this will virtually be able to cater to the plants that we will be setting up. We feel that we will be very competitive, considering the basic customs duty (BCD) of 40 percent that has been imposed on modules.

What will be the difference in price points of imported solar modules and the indigenous ones?

There will be at least a 20 percent cost difference between what will be produced in the country and what is imported with the BCD. It, of course, depends on the manufacturer and the companies that are setting up the technology and the plant. But roughly, I would say about 15-20 percent difference.

It was a good move by the government to support Indian industry with the production-linked incentive (PLI) scheme.

What is the status of the second tranche of the PLI scheme for high-efficiency solar modules after its notification?

As you know, the first phase of Rs 4,500 crore was allocated in December 2021. For the second phase, which is of Rs 19,500 crore, the prospective manufacturers have to submit their proposals by the end of this month. We expect a decision on this by March or latest by April. Notwithstanding that, we have gone ahead with the implementation of the project. We expect that some benefit will accrue from the PLI scheme of the government.

Tata Power has been talking about divesting some of its assets for a while. Is it getting delayed, and if so, why?

We have plans to divest from our Georgia and Zambia hydropower plants. The reason for the delay is that were some local contractual issues with the governments over there. In the coming financial year, we'll be able to finalise those commercial arrangements, and thereafter, we will do the divestment. So, we are definitely keen to divest. But our purpose of divestment is to get proper valuation, and the benefit of that has to go to the company and its shareholders. This is as per our overall plan of concentrating on growth within the country, considering the type of opportunity here in India.

Tata Power has made divestments in the past too. The Arutmin coal mine divestment was done many years back, and the last tranche of payment is expected in this quarter. So, that is now concluded. We also did divestment in the wind plant in South Africa, and we got the money for that. We did the divestment in our shipping business in Singapore, and got the money two years back.

Regarding the pass-through that is being allowed for imported coal-based power plants, could you tell us what would be the tariff impact on the consumer?

Section 11 of the Electricity Act, when it was imposed, it was for about 10 imported coal-based plants only. So, it is not a large quantity in the overall basket of procurement of power that is done by state discoms. So, there would be a 2-5 percent increase on consumer power tariffs.

Could you give a break-up of the renewable energy portfolio expansion plan of Tata Power?

Right now, we have nearly 36 percent of our total capacity which is from renewable, hydropower plants, and gas-based power plants. We expect that by 2030 this will become nearly 70 percent. And over a period of time, by 2045, we aim to become 100 percent. So, that's how over a period of time we plan to reduce our overall capacity of coal-based plants and increase the non-carbon-generation capacities, be it hydro, gas, solar, wind, or storage, including pumped storage. So, I think we are on the right track to reduce our carbon footprint and move towards more sustainable energy.

What is your overview of the power demand this summer? Do you see another coal/power crisis in the coming months?

The increase in consumption of power in the country in the last nine months has been nearly 10 percent. Even in the month of January (2023), the increase in consumption has been 12 percent. So, we expect, going forward, the consumption pattern will continue to increase in the country. It will remain in double-digits. Even during the winter this time (December and January), electricity requirement was as high as 205-210 GW. So, I won’t be surprised if we cross even the government’s projection of 230 GW. In fact, the country may even touch 240 GW.

All the plants in the country, including the imported coal-based plants, are geared up. Many of the renewable capacities that were added in the last one year will start generating power. The government has resolved several issues in the past two years. Transportation arrangements have been made, which have helped in better availability of coal in power plants, barring a few stray incidents. However, some areas might experience shortage due to non-availability of railway line, but by and large, coal availability has been quite consistent.

So, overall we should be able to cater to the power requirement with a combination of conventional and new generation.

Post the land subsidence incident in Joshimath, hydropower projects are drawing flak from a section of people. What is your view on hydropower projects?

Hydropower plants are very long-term investments, and a single set-up alone gives you clean power for a long period of time. The hydropower plants that we have, all of them were set up between 1915 and 1927, more than 100 years back, and they perform excellently. Even now, after 100 years, they give us clean power which we supply to the city of Mumbai. And I think, going forward, wherever there is an opportunity, if you have a good catchment area, if you have a good flow of water, then it makes sense to have hydropower plants. One, of course, has to be careful and cautious and needs to be very scientific in approach, by studying the geological conditions properly.