'This was earlier driven by industries and the commercial sector.'
Praveer Sinha, chief executive officer and managing director of Tata Power is optimistic about India's power demand growth in the long term.
The company will be spending Rs 60,000 crore in the next three financial years, with significant investments in renewables.
In a telephonic interview with Amritha Pillay/Business Standard, Sinha discusses the company's plans for coal mines, as it makes a concerted push towards carbon net zero.
What are the opportunities and challenges in India's power demand?
Over the past two years, the compound annual growth rate (CAGR) has been nearly 10 per cent, which is phenomenal in the sense that earlier the growth used to be in the range of 5-6 per cent.
This was earlier driven by industries and the commercial sector, but now even the rural demand has increased, thanks to the slew of government schemes.
I expect the demand growth to continue, not just for two to three years, but even longer.
Extreme weather conditions across the country, both in summer and in the winter months are also leading to huge demand in power, while hydro generation gets impacted because of lower snowfall.
What kind of impact will lower snowfall have on hydro-based power units?
Not too many hydro projects are coming up because of the challenges in the setting up of these plants.
To meet the surging demand, the existing coal gas hydro and the several new renewable projects that are coming up will be required to generate at full capacity.
This kind of demand growth typically leads to higher merchant power rates. Would you increase your exposure to it?
Most of our plant capacities are tied up on a long-term basis, with about 5 per cent of our total generation through short-term or in the day market.
We have no plans of changing that exposure.
We have a simple regulated business, which allows us to service our clients on a long-term basis.
Given the Red Sea crisis, what is your outlook on the coal market?
Most of our coal comes from Indonesia. We are not seeing any discount, even if it happens, it is only for a short period.
So, it is not a general trend where you will have a large quantity of distress sales happening in coal.
What is the long-term plan for coal mine assets?
We expect our thermal plants to continue till the term of the existing PPA and will decommission them thereafter.
Our coal mine business is separate, where we have equity investment. We are continuing to monitor the situation.
Maybe at the right time, we can decide to divest, if it makes business sense and provide better value to our shareholders.
You are planning to invest Rs 60,000 crore by FY27. Please share details on the funding plans.
Every year our capex goes to existing businesses as well as new ones.
We would have a large capex in the renewable business where we are adding capacity, including the manufacturing plant (of solar modules and cells) that we have set up.
This year, we are doing a Capex of nearly Rs 15,000 crore, and in the next three years hereafter up to FY27, we are looking to invest Rs 60,000 crore.
All these projects are around 70-30 debt to equity.
The equity will come from internal accruals.
The fundraising is not planned yet, but to fund it at the right time, we keep on evaluating our best methodology.
Are green financing options, including sustainability bonds under consideration?
Yes, we keep on looking at it so that our average cost of borrowing comes down drastically.
Whatever new structures or instruments come to the market, we will examine them from a long-term perspective.
Feature Presentation: Aslam Hunani/Rediff.com
