Tata Power to go for ‘easy regulation’ nations

Tata Power Co Ltd, India’s largest private power producer, is looking at bidding for projects in countries with easy regulatory norms, with South and West Asian nations being high on the priority list, a top official said.

The company has already set up a crack team of “seed staff”, which is looking for the “right environment” where the company can bid for projects, Anil Sardana, managing director of Tata Power, told Business Standard.
The right environment depends on several factors, but the main criterion is fewer regulatory hurdles to set up new capacities, he added.
Too much regulation, according to Sardana, calls for a lot more due diligence. “Half the problems get resolved when you know it’s just market dynamics. One can go ahead if he believes that the market can absorb the investments without regulatory glitches.”

Tata Power has been a victim of regulatory flip-flops in India, which put the viability of some of its projects in the country, including the ultra mega power project in Mundra, Gujarat, in jeopardy.

Last month, the company had announced a major South African joint venture deal to develop two wind power projects at an investment of around Rs 300-400 crore.

It secured the 139-megawatt (Mw) Amakhala and 95-Mw Tsitsikamma projects in the joint venture with South African miner Exxaro Resources Ltd.

The company now wants to replicate this model in more countries, and has even short-listed a few, where it would be easier to set up power capacity. South Asian nations such as Sri Lanka, Maldives, Nepal, Pakistan and Bangladesh, which are closer home, are high on the priority list, according to company officials. It’s also actively considering West Asian countries, especially Turkey, to set up power projects.

Sardana said Turkey was a very attractive destination because of its open market approach. Turkey is an almost no-regulation zone.

“Everyone can buy power from wherever they can. The country has offered a lot of opportunities to be competitive and to be a part of the market like distribution and generation,” he said.

Tata Power is also eyeing projects in other major Asian economies such as Indonesia, Vietnam and Myanmar.

The short-listed geographies will have to pass a three-pronged litmus test. “Firstly, our presence there should be relevant to the geography. Secondly, it should meet our criteria in terms of fiscal qualification and hurdle rate. The regulatory risk and law and order issue should also be palatable,” Sardana said.

He, however, added Tata Power would not discriminate between its home country and those selected. “We are running a very open race, wherever the baton-passing is faster and we win the race, we will make an investment.”

In the African continent, Tata Power has already laid out a road map for expansion. It plans to set up as much as 16 gigawatts of capacity by 2025 in Africa through joint ventures. The primary focus will be on clean fuels like natural gas, hydro, solar and wind. “We will also set up some coal-based projects in African geographies, where power needs are tremendous,” said Sardana.

Tata Power suffered a net loss of Rs 1,088 crore in the year ended March 31 after having to bear an impairment charge of Rs 1,800 crore, bulk of which was related to its Mundra power project because of an increase in costs of imported coal and foreign exchange volatility.
Source: BS

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