Tata Power: A company for all seasons as it sails towards fully integrated solar cell structure

Praveer Sinha, CEO and MD, Tata Power Company Ltd.

Tata Power is inching closer to becoming a fully integrated solar cell manufacturer by setting up a Rs 6000 crore solar ingots and wafers plant but contrary to media reports that the plant may be in Odisha, MD & CEO Praveer Sinha clarified they have not decided where to put up the backward integration plant.

The company already has a total cell and module capacity of 4.9 GW, which include a 4.3 GW facility in Tirunelveli in Tamil Nadu and 650 MW modules and 500 MW cell units in Bengaluru. But the company, like all Indian solar companies, imports huge quantities of ingots and wafers, mainly from China. To reduce this dependence on imported raw materials and enhance supply chain efficiency, Tata Power is deepening its backward integration by setting up a 10 GW of wafer and ingot manufacturing.

Speaking to me on our Moneycontrol series “Latha & The Leaders,” Sinha said, “It will cost about Rs 6000 crores and we are in the process of finalizing the location. We are also in the process of finalizing the technology and technology partner for that…we are still under discussions because it requires certain amount of land, water, also some basic infrastructure facilities in terms of ETP and ZET and all that.”

Dr Sinha was however emphatic that the company will take all the decisions within two months and set up the plant in record time.

What stood out in Sinha’s interview is the resilience and nimbleness of this 110 year old company. Not all large companies survive change. Alcatel did not, nor did Bell Telephones. Gramophone companies, CD makers, camera and copier companies were all phased out with new technologies.

But Tata Power clearly has done better. Way back in 1996, Tata Power set up its first solar plant, a small 110 KW project near Lonavala in Maharashtra. The first big step came in 2016 when Tata Power, smelling the winds of climate change and ESG investing, acquired Welspun Renewables for $1.3 billion, substantially expanding its clean energy portfolio and later that year 2016 announced that the company's future investments in India would be solely in renewables.

With some legitimate pride, Sinha said, “Right now, 44% of our installed capacity is clean energy which is solar, wind and hydro. In 2030 clean energy will become 70% and 2045 it will become 100%. So that is the way that we are looking at our energy transition. Remember in 2015 we had just 16% of our installed which was clean energy.”

Yet transitioning with the times appears to be only one of its strengths. Yet another major strength of the company has been its ability to adjust to changing policy flip-flops. The power sector in India has been singled out by politicians for socialistic overtures. Political parties of every hue have been offering free power or subsidised power, and sending the distribution companies deep into debt when state governments repeatedly fail to compensate the discoms for the subsidised or free power that they supply.

Tata Power (along with a few other major private power companies) has appeared to show the way to salvation. In 2020 Tata Power won the power distribution contract for the state of Odisha and in the past four years, it has not only made these discoms profitable, but has done so without raising tariffs.

The central government is now hoping to replicate this successful experiment in other states through the Electricity Amendment Bill which will offer incentives on the accumulated debt, if states are willing to privatize their discoms or at least run them on a public-private partnership.

Sinha said he is expecting Uttar Pradesh to be the next state government to put out bids for private participation in its discoms (probably in the next couple of months).

Tata Power has ambitious plans to expand on all fronts. It has a Rs 1 lakh crore expansion plan over the next 5 years with a conservative debt equity ratio of less than 2 and debt-to-EBIDTA ratio of less than 4. “Every year, we will put up about 25,000 crore in capex; split 1/3 each in hydro, distribution & clean energy,” Sinha said.

“We expect that our revenue will grow by nearly 2 times, our EBITDA will grow by nearly 2.5 times by 2030, and our profit will double,” he added.

Quite an achievement for a 110 year old company to be investing in cutting edge solar ingot manufacturing, wading through socialistic rules transitioning into renewables at the right time, and still staying profitable.