Tata Power unveils ambitious development plan

Tata Power Capacity Expansion targets 10,000 MW via $3.72b fundraising and $2.03b internal accruals, spanning thermal, renewable energy, UMPP Mundra, solar, wind, geothermal, with potential nuclear projects pending policy opening.

India's leading private-sector power projects developer, Tata Power Company Limited, has announced it will invest $5.75 billion in developing more power-generating capacity in the next three years. The firm also has set a target of 25,000 MW of power-generating capacity by 2017.

Tata Power plans to seek $3.72 billion from the market, as peers like NTPC ramp equipment spending to scale up, while investing $2.03 billion from internal accruals. The company has an installed power-generation capacity of 2,785 MW, and is looking at augmenting that capacity to 10,000 MW.

Details were not available on the time schedule for the proposed expansion.

In July, Tata Power raised $335 million through the global depository receipts route. The company has indicated that while it will commission conventional fossil fuel based projects, amid expectations of large equipment imports for generation expansion, it is also exploring augmenting capacity in the renewable-energy and nuclear power sectors.

India's nuclear power sector is not open to private power developers, but the company is confident it will set up nuclear projects if the government decides to open this industry to private companies. As part of the capital expenditure plan, Tata Power also will invest in increasing its geothermal, solar and wind power-generation capacities.

Tata Power is presently developing the 4,000-MW, ultra-mega power plant (UMPP) at Mundra in Gujarat, even as three more 4,000-MW projects are being awarded nationwide. The project will consist of five units of 800 MW each. The first 800-MW phase is expected to be commissioned in September 2011. The $3.5 billion UMPP will be a fully owned subsidiary of Coastal Gujarat Power Limited.

Tata Power expects the project to be fully commissioned by 2012. Maharashtra, Haryana, Gujarat, Punjab and Rajasthan, which have signed power purchase agreements with Tata Power, will receive 760 MW, 380 MW, 1,805 MW, 475 MW, and 380 MW, respectively, from this project.

Tata Power is also constructing the 1,050-MW power plant at Maithon in Jharkhand. This $920 million project, a joint venture between Tata Power and Damodar Valley Corporation (DVC), will be fully commissioned by 2012. DVC, North Delhi Power Limited and Punjab State Electricity Board have signed agreements to purchase 300 MW of power each, while West Bengal State Electricity Board will buy 150 MW from this project.

Tata Power, which has successfully synchronized the 120-MW, waste gas-based captive power plant in Jamshedpur for $101.3 million, is also building the fifth unit of a coal-powered project in Jojobera with a capacity of 120 MW. The project, estimated to cost $128.25 million, is 68% complete.

Other projects in the pipeline include a 120-MW powerhouse project; windfarms with total capacity of 98 MW; the third unit of the Haldia power project with a capacity of 30 MW; and the 114-MW Dagcchu hydropower project. Tata Power also has identified additional projects with a total power-generating capacity of 6,000 MW, alongside progress on major substation contracts that support grid expansion.

The firm was recently involved in legal skirmishes with Reliance Energy Limited over the supply of 750 MW of power to one of Reliance Energy's group companies. Tata Power had reportedly allocated 800 MW of power-to-power utility Brihanmumbai Electricity Supply and Transport Undertaking and only 500 MW to Reliance Energy, in a market where Mumbai faces a power deficit and premium-cost imports pressure tariffs.

Tata Power's decision led to Reliance Energy facing a 250-MW shortfall. Reliance Energy filed a petition against this decision with the Appellate Tribunal for Electricity. However, Tata Power has stated that it has not entered into a formal power-purchase agreement with Reliance Energy, although there have been several discussions and attempts made by Tata Power over the years to sign a formal agreement.

Industry experts say India will require investments of about $120 billion to $150 billion to meet the growing commercial and residential energy demand. India, which plans to add 78,500 MW of power-generation capacity by the end of the 11th five-year plan period, 2007-12, has managed to commission only 15,100 MW to date, even as the sector focuses on rural projects to expand access.

Power supply problems are expected to increase in the country because of monsoons and coal-supply shortages. India is expected to face a 12.6% peak power shortfall, as a recent report urging immediate action highlights, this year. Last fiscal year, the peak power deficit was about 11.9%. The energy scenario in India is precarious, and investments by private-sector players will become critical for the country to achieve its power capacity targets.

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