Tariff case stalls Tata Power's investment plans

NEW DELHI Tue May 28, 2013 4:32pm IST

An electric pylon carrying high tension wires is pictured in front of a residential complex after electricity was restored in New Delhi July 31, 2012. REUTERS/Adnan Abidi/Files

An electric pylon carrying high tension wires is pictured in front of a residential complex after electricity was restored in New Delhi July 31, 2012.

Credit: Reuters/Adnan Abidi/Files

Related Topics

Stocks

   

NEW DELHI (Reuters) - Tata Power Co will hold off on major investments until it clarifies the fate of a regulatory decision to raise tariffs, a company executive said on Tuesday.

The electricity regulator allowed Tata Power, a unit of the Tata conglomerate, to raise tariffs for power generated at its Mundra plant in Gujarat.

The company, however, must first agree on the increase with officials from the states it supplies electricity to. A similar decision that allowed rival utility Adani Power Ltd (ADAN.NS) to raise tariffs is also being challenged in court by local officials keen to avoid a public backlash in an election year.

"Let me put it this way: the financial pressure on us arising out of the Mundra situation is enormous at this point in time," S. Ramakrishnan, executive director for finance, told Reuters in an interview.

"We will be very, very cautious and selective in our growth options," he said. "If one is talking of any large acquisition which demands an immediate outlay of large funds we'll definitely not look at it."

Regulatory uncertainty, ranging from a tax dispute between the government and Vodafone Group Plc (VOD.L) to a lack of clarity on rules allowing foreign supermarkets to set up in India, has stifled investment in Asia's third-largest economy.

Counting the cost of India's blackouts, click r.reuters.com/pep48t

India has the world's fifth-largest coal reserves but domestic supplies are patchy as mining projects are mired in red tape and corruption, increasing the reliance on imports.

Tata Power imports coal from Indonesia and has also been scouting for opportunities to buy coal assets overseas, including in the United States and Africa, Ramakrishnan said.

"While we are looking at them, I wouldn't say we are anywhere close, because there are challenges in terms of long term competitiveness and availability of infrastructure to facilitate the export of coal," he said.

Tata Power, which has an installed capacity of 8521 MW, aims to generate 26,000 MW by 2020. With fuel supply constraints and land acquisition stalling new projects at home, the company has looked abroad for new opportunities.

It recently signed an agreement to develop two hydro projects in Georgia and has a joint venture in South Africa. The company is also looking at developing projects in Myanmar, Vietnam, the United Arab Emirates and Saudi Arabia.

"Very often there is more clarity in some of the jurisdictions on policy matters pertaining to the sector," Ramakrishnan added.

Tata Power's shares are valued at $3.9 billion. The company posted a surprise consolidated net loss in its October-December quarter, hurt by higher finance and depreciation costs. Its fourth quarter results are due on Thursday.

(Reporting by Matthias Williams; Editing by Malini Menon and Miral Fahmy)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

India-Nepal Ties

REUTERS SHOWCASE

Wipro Reaps Profit

Wipro Reaps Profit

Wipro Q1 profit up 30 pct on new contract wins   Full Article 

Monsoon Revives

Monsoon Revives

Monsoon revival keeps rain above average   Full Article 

Tackling Food Prices

Tackling Food Prices

India to free up extra 10 million tonne wheat in open market  Full Article 

Facebook Results

Facebook Results

Facebook beats Wall Street targets, stock hits record high  Full Article 

Struggling Economies

Struggling Economies

Asian economies to struggle on weak export demand - Reuters poll  Full Article 

Mining Roadblock

Mining Roadblock

Coal India's plans for 20 mines hit by land, environment delays  Full Article 

Power Jolt

Power Jolt

UAE's TAQA pulls out of India power plant deal with Jaiprakash  Full Article 

Factory Sector

Factory Sector

China July HSBC flash PMI at 18-month high of 52.0   Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage