Tata Power has offered to sell 51 per cent stake in its 4,000 MW Mundra power project for Re 1 to states like Gujarat, which buy electricity from it, to tide over the financial crisis facing this business.
Coastal Gujarat Power Ltd (CGPL), the Tata Power unit which operates the Mundra project, wrote to Gujarat Urja Vikas Nigam earlier this month offering to retain only 49 per cent stake and operate the project as a contractor provided the procurers buy all the power at higher tariffs.
In the letter, copies of which were marked to Nripendra Misra, Principal Secretary to Prime Minister, and Union Power Secretary, CGPL CEO Krishna Kumar Sharma said Mundra has accumulated losses of Rs 6,457 crore against a paid up equity of Rs 6,083 crore.
It has outstanding loan of Rs 10,159 crore and lenders have stopped further disbursal due to non-viability of the project, he wrote.
Tata had in February 2006 won a bid for the 4,000 MW Mundra project in Gujarat, quoting a price of Rs 2.26 for every unit of electricity generated. It had intended to fire the plan with coal imported from mines owned by the Tata Group in Indonesia.
In 2010, the Indonesian government said that any export of coal could be done only at prices linked to international rates.
Tata, in turn, sought higher tariffs for power, but the plea was rejected by the Supreme Court. Sources said CGPL in the letter stated that financial position of the company continues to deteriorate and has reached a critical situation due to substantial loses incurred.
It wanted tariffs to be negotiated or power procurers take over 51 per cent paid up equity shares of CGPL for a nominal value of Rs 1 and grant relief to the project by purchasing power at a rate to fully address the under-recovery of fuel costs.
When contacted, a Tata Power spokesperson said the company would comment issue shortly. Mundra project, comprising of five units of 800 MW each, was commissioned between 2012 and 2013. It has signed a 25-year agreements to sell electricity to utilities in Gujarat, Rajasthan, Maharashtra, Haryana and Punjab. Gujarat is the lead buyer.
Sources said CGPL has stated in the letter that against the project outlay of Rs 17,900 crore, the company has an outstanding term loan of Rs 10,159 crore and an additional amount of Rs 4,460 crore which is due to Tata Power.
After the Supreme Court rejected compensatory tariff to it and similar power plant of Adani Group, CGPL made a plea with all procurers to consider afresh the issue of compensatory tariff but Gujarat Urja Vikas Nigam Ltd specifically denied the request.
CGPL has stated that it is making the offer to avoid the project being rendered unviable and eventually turning into a Non Performing Asset (NPA) or bad loan, thereby depriving the consumers of one of the lowest cost power.