Coal prices, Mundra plant key for Tata Power How coal prices move and whether there is clarity on compensatory tariffs it will get for Mundra plant are critical for Tata Power

Tata Power has only 800 megawatts (MW) capacity that will come up over the next four-five quarters or so. Photo: Priyanka Parashar/Mint


 Tata Power Co. Ltd’s earnings growth outlook over the medium term is wholly dependent on two things—how global coal prices move and whether there is clarity on the compensatory tariffs it will get for the Mundra power plant. While the appellate authority on electricity had awarded Tata (and Adani Power Ltd) a compensatory tariff for its imported coal-based power plant, the Supreme Court has asked the tribunal to revisit the issue. If Tata had chosen to book the tariff (which it has not), its September quarter revenue would have been boosted by another Rs.164 crore, which would have flowed straight to profits. The Mundra subsidiary posted a net loss of Rs.274 crore in the September quarter. However, it needs to be noted that even after accounting for the compensatory tariff, the plant would have made losses of 21 paise per unit of electricity sold during the quarter. Continuing losses at this plant have forced the company to provide Rs.2,650 crore as impairment charges over fiscals 2012 and 2013. The quantum of compensatory tariff and its time of implementation thus remains a huge shadow over Tata Power’s earnings. Mundra is all 

NITESH KUMAR SINGH
PGDM 3RD S