More Stories

Informist, Friday, Aug. 1, 2025

By Narayana Krishna and Sunil Raghu

HYDERABAD/AHMEDABAD – Tata Power Co. Ltd is expecting to reach an agreement with five states on power purchase agreement for its 4000-MW Ultra Mega Power Project at Mundra in Gujarat by the end of August, the company management said in a post-earnings press conference on Friday.

"We are in discussion with all the state governments and there has been very good movement in the last one month wherein all the five states have taken the details (of PPA) and are internally discussing so that this can be finalised within August," Tata Power management said. "And we do expect that once it is finalised, we can go ahead and start the project, the plant. And thereafter, it will be able to operate for the balance period up to 2038."

Tata Power's 4000-MW Mundra UMPP turned financially unviable after Indonesia's 2010 coal export rules raised fuel costs, making the fixed tariff of INR 2.26/unit unsustainable. Although the regulator allowed partial relief through compensatory tariffs, state discoms and the Supreme Court rejected most of it, upholding the original contract. The unresolved issue of who bears fuel cost escalation ultimately led to the plant's shutdown, posing a long-term challenge for the company.

"As all of you are aware, Mundra (UMPP) operated under Section-11 till 30th June (Jun. 30). And since then, we have been in discussion with all the five states that we need to finalise the PPA so that there is a permanent arrangement between us and the five procurers. A number of meetings have taken place with all the five procurers coming together in Delhi," Tata Power said. 

Section 11 of the Electricity Act, 2003, allows the government to direct power generators to operate during extraordinary circumstances, such as emergencies or threats to public interest. It also provides a mechanism to compensate generators for any financial losses incurred due to such directives.

Tata Power management said based on the data that has been exchanged with the company, purchasing the power from Mundra plant may be a win-win situation for both parties. When compared to the power that five states are buying currently and the price that we may offer is beneficial for both, the company said.

"We do expect that within August, we'll be able to come to some sort of understanding and thereafter the plant can start operating," Tata Power said. "As far as power generation in the country is concerned, this was the first quarter that we had after many years where we had a reduction in the demand. This was because of early onset of monsoon."

DEMAND REVIVAL

Tata Power expects power demand in the country to improve in the coming months, though it has seen slow demand during Apr-Jun. "We have seen many unseasonal rains this time. We expect that from August onwards, the weather will improve, and the demand will increase," Tata Power said.

The company said its power generation business has been very steady and the cash flow of the company and all operating plants, whether coal-based or gas-based or hydro, has done exceedingly well. The transmission and distribution business has been doing well, the company said.

CAPEX – DEBT

Tata Power is maintaining its earlier capital expenditure guidance of INR 250 billion for 2025-26 (Apr-Mar) and a large portion of it goes to renewable and green energy initiatives. Tata Power renewable energy operational capacity as of Jun. 30 was at 5.6 megawatts, and total generation capacity stands at 26.03 gigawatts, which includes operational and under-construction projects. Tata Power is planning to spend around INR 30 billion on pumped storage and green hydrogen projects and also on a green energy innovation project in Bhutan, the company said. The company spent close to INR 37 billion in capex in the June quarter.

On debt, Tata Power is confident of maintaining a healthy debt profile. The consolidated debt as on Jun. 30 was close to INR 480 billion, Tata Power said. The debt-equity ratio of the company is at a comfortable level, the company added.

Tata Power is not expecting coal prices to go up in the next few quarters. At present, coal prices have come down and are making projects like Mundra an attractive proposition to buyers, the company said. The company is not importing any coal from Russia, Tata Power said.

For the June quarter, Tata Power reported a consolidated net profit of INR 10.60 billion, up 9% on year, beating the Street's view. The revenue for the June quarter grew over 4% on year to INR 180.35 billion.

On Friday, shares of Tata Power closed at INR 389.30 on the National Stock Exchange, down 2.12% from its previous close.  End

Edited by Deepshikha Bhardwaj

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2025. All rights reserved.