Debt laden Tata Power has sold its stake in a South African joint venture and wind power company Cennergi to the partner Exxaro Resources for $106 million (Rs 760.80 crore) to reduce its debts and to re-invest in emerging business areas.
Tata Power on Tuesday said Khopoli Investments, a 100 per cent subsidiary of Tata Power, has entered into a share purchase agreement with South Africa's leading coal producer Exxaro Resources for the divestment of the company's entire 50 per cent stake in Cennergi. It owns two wind farms in South Africa, Amakhala Emoyeni with a generation capacity of 134.4 MW and 95 per cent shareholding and Tsitsikamma Community Wind Farm with a generation capacity of 95.3 MW and 75 per cent shareholding. Each project has a 20-year Power Purchase Agreement (PPA) with the State power utility Eskom. The agreement is likely to be completed by the third quarter. Post this transaction, Exxaro will have full ownership of Cennergi.
Tata Power has been able to reduce its consolidated debt to Rs 46,891 crore, after selling off many non-core businesses. So far it has used $510 million of such proceeds to reduce debts. These include stake sale in Indian Energy Exchange (IEX) for Rs 199 crore, stake in Tata Communication for Rs 2,150 crore and realising $160 million out of sales of its coal subsidiary Artumin in Indonesia for $ 400 million. The company is also planning to sell its other non-core assets such as Nelito, Tata Ceramics and NELCO with a view to divest assets worth Rs 8,000 crore to reduce debts. So far the company has realised about Rs 3300 crore, excluding the current sale.
Tata Power's balance sheet strained after its subsidiary Coastal Gujarat Power (CGPL), an ultra mega power project with 5000 megawatt of capacity fuelled on imported cheap coal, ran into trouble following Indonesia changing its coal policy in 2011 to sell coal at benchmark international prices.
While CGPL had losses of Rs 855 crore in 2016/17, the losses mounted to Rs 1,408 crore in 2017/18 and increased to Rs 1,363 crore for the nine months of 2018/19. Mundra alone accounts for nearly Rs 17,000 crore of Tata Power's debts. Further, Tata Power had acquired Welspun Renewables Energy for Rs 9,249 crore in 2016.
"The decision to monetise this South African asset is in alignment with our stated strategy to deleverage the balance Sheet by divesting sub-optimal size international assets," said Mr Praveer Sinha, CEO and Managing Director, Tata Power. "The proceeds from sale would be re-invested in emerging areas where there is a huge growth opportunity and Tata Power will focus on renewable power, power distribution and service-led businesses in India," he added.
"The collaboration between Exxaro and Tata Power over the past seven years to develop these projects to their current status has been commendable and an outstanding success in South Africa's implementation of its energy strategy," said Mxolisi Mgojo, CEO of Exxaro Resources.