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Tata Power

The biggest private power producer is ramping up existing capacity

It is the biggest electricity producer in the country outside state control. Tata Power has got capacity of 2,785 MW of power generation, but it plans to increase it 5 fold to 13,000 MW by 2014, with a capital expenditure of over Rs 10,000 crore. By 2011, the company will be taking a big step towards achieving that objective, when its ultra-mega power project (UMPP) in Mundra is completed, thereby adding 800 MW to its existing capacity.

With the government willing to fast-track the bidding process for 3 more UMPPs, Tata Power is in a better position to emerge successful, since Reliance Power, its major competitor, is already working on 3 others.

However, the company’s rising debt is a matter of concern. At the end of FY09 its net debt burden was Rs 4,750 crore on a standalone basis and Rs 13,850 crore on a consolidated basis. The factor that is still in its favour is that most of the loans are due around 2014-15. By that time most of its projects would have been commissioned and cash flow would get initiated, helping the company to pay back.

To add to the positive, its 100 per cent subsidiary, Tata Power Trading Co., has started contributing to the profits. In future, with a greater power generating capacity, as and when projects get commissioned, trading profits would see an upside. As of now 12 per cent of Tata Power profits are derived from power trading .

For Q4FY09, the company’s profits jumped to Rs 368 crore, up by 265 per cent quarter-on-quarter (q-o-q) and for the whole year FY09, profits went up by 6 per cent to Rs 922 crore. The company, as of March 31, 2008, had liquid cash to the tune of Rs 1,140 crore with an interest coverage ratio of more than 3.25, that is its operational profits are 3.25 times more than its interest obligation.

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