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Informist, Tuesday, Nov. 11, 2025

 

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--Tata Power: Jul-Sept was tough quarter as prolonged rains hit demand 
--CONTEXT: Tata Power mgmt's comments in post-earnings call with analysts 
--Tata Power: Couldn't operate Mundra power plant as no demand due to rains 
--Tata Power: Hope to add 700 MW renewables in Q3, 600 MW in Q4 
--Tata Power: Hope to cross 7 GW operating renewable assets by Mar 31 
--Tata Power: Debt rose INR 64 bln in Jul-Sept, total debt at INR 540 bln 
--Tata Power: Hope to sort out Mundra plant issue with Gujarat soon 
--Tata Power: Mundra resolution will start with Gujarat, then other states 

 

By Sunil Raghu and Ashutosh Pati

 

AHMEDABAD/MUMBAI – Tata Power Co. Ltd. is in advanced stages of talk with the Gujarat government to find a resolution and reach an agreement over supplementary power purchase agreement in the coming few weeks. "...we want to have a long-term resolution rather than going year after year on Section 11. So, we have been in discussion with the government of Gujarat and hopefully we should be able to come to some arrangement," the company's management told analysts in its post-September earnings conference call. "The details are still getting finalized and it has to go to the government approval process."

 

Tata Power has five supercritical units of 800 megawatts each at Mundra. The plant accounts for nearly one-fourth of Tata Power's total electricity generation capacity of 16 gigawatts. These plants accounted for INR 112.9 billion of the company's consolidated turnover of INR 645.02 billion in the previous financial year.

 

As per the power purchase agreements, Tata Power supplies electricity from its Mundra plant to Gujarat, Rajasthan, Maharashtra, Haryana, and Punjab at a fixed tariff. These power purchase agreements do not allow the company to pass on any increase in the cost of imported coal to buyers of the power it produces. Only if and when the government imposes Section 11 of the Electricity Act, 2003, the power producers are allowed to recover the actual fuel cost from electricity buyers. For Tata Power's Mundra plant, this arrangement existed from May 2022 till Jun. 30, 2025. With the provision ceasing to be in force since Jul. 1, Tata Power was forced to suspend generation from Jul. 3., as it could not recover the full fuel cost. This affected its earnings for the September quarter.

 

Tata Power reported lower-than-expected earnings for the September quarter. The electricity generation and electric utility company's consolidated net profit for the quarter fell nearly 1% on year to INR 9.19 billion, below the Street's view of INR 9.95 billion. Its consolidated revenue from operations for the quarter also fell nearly 1% on year to INR 155.45 billion, way below the analysts' expectation of INR 168.82 billion.

 

The management also identified early and prolonged rains as one of the key reasons for a "tough" September quarter. It said that this affected demand for electricity and it was also the reason that it could not run Mundra power plant. However, it said that this time they are looking for a long-term solution rather than depending on imposition of Section 11 of the Electricity Act every year to recover its costs. "...we're kind of ensuring that post-discussions with Gujarat, we're also close with the remaining states. The idea is to close it as fast as possible," the management said. 

 

The company is optimistic that while Mundra has been its biggest challenge in the quarter gone by, rest of its business, including renewables and transmission and distribution, would continue to improve going ahead. The company said it hopes to add 700 megawatts of renewable energy in the December quarter and another 600 megawatts in the March quarter, taking the total renewable addition to 1.5 gigawatts in FY26 and total operating renewables capacity to 7 gigawatts. This addition is still lower than its targeted run rate of adding 2.5 gigawatts of renewables every year for coming two financial years. "Whatever is remaining will get completed in the year thereafter," the management added.

 

The company plans to spend nearly 60% of its remaining capital expenditure for the current financial year on renewables. Tata Power had set a target of spending INR 250 billion in capex for FY26. Of this, it has already spent INR 75 billion in Apr-Sept. Of the remaining, it will spend around 60% in renewables and rest in other business.

 

The company's borrowings for the September quarter rose INR 64 billion, taking the company's total debt to INR 540 billion, the management said. "...even with this rise in debt, our leverage ratios are very good. Our net debt to underlying earnings before interest, tax, depreciation, and amortisation remains 3.3 and our net debt to equity is 1.2, which is very competitive, especially in the infrastructure industry," the management said.

On Tuesday, shares of the company closed flat at INR 395.60 on the National Stock Exchange. The company announced its September quarter earnings post-market hours.

 

Edited by Ashish Shirke

 

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