Tata Power has announced its plan to merge three of its wholly-owned subsidiaries with itself with a view to achieving greater synergies.
A recent release by Tata Power announcing its financial results for the quarter ending June 30, 2020, mentioned that three of its wholly-owned subsidiaries —Coastal Gujarat Power Ltd. (CGPL), Tata Power Solar Systems Ltd (TPSSL) and Af-Taab Investment Company Ltd (Af-Taab) are proposed to be merged with Tata Power (the parent company) for greater synergies in financing, compliance, and oversight.
This merger, subject to necessary approvals, is part of a strategic initiative to simplify the group holding structure and a broader plan to set the company for future growth through fiscal consolidation and strengthening of balance sheet. The merger aims to achieve the long-term objectives by facilitating efficient use of cash and making available corporate support to the businesses of the said wholly owned subsidiaries as needed, the release said.
Mundra UMPP
CGPL, it may be mentioned, owns the ultra-modern 4,000-mw Mundra ultra mega power plant in Gujarat. However, owing to tariff-related issues, CGPL has incurred heavy losses. Commenting on the situation, Praveer Sinha, CEO & MD, Tata Power, said, “CGPL has already suffered large losses and is facing difficulty in financing its operations. Given the inordinate delay in resolution of the tariff matter, the merger will provide relief through direct support from the parent company. The Company continue to be in discussion with various state governments and state discoms. We do hope that the State Governments will take a practical view and resolve the PPA amendment issue in the interest of all stakeholders.”
Renewable InvIT
In July this year, Tata Power planned to set up a renewable investment infrastructure trust (InvIT). “This InvIT provides the option to recycle capital once the assets are operational. Further, the InvIT strategy enables Tata Power to raise capital at lower cost post stabilization of assets and grow the portfolio whilst we deconsolidate our debt,” the release said, explaining the rationale of the proposal.
At present, Tata Power has about 2.6 GW of operating renewable-energy plants and 1.5 GW of capacity in pipeline taking the total capacity to 4.1 GW.
Future Plans
Moving forward, Tata Power also plans to scale-up the growth of the consumer-facing energy solution businesses like EV charging, smart metering, retail rooftop solar, solar pumps, home automation and solar micro grids in rural areas. On June 1, 2020, it may be recalled, Tata Power acquired CESU distribution in Odisha, doubling the consumer base to 5 million in the distribution segment. The aim is to become a leader in distribution business space by evaluating similar opportunities and achieving 10-million strong consumer base over the next five years.
Featured image is a file photograph of Tata Power’s Mundra UMPP in Gujarat.
