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Problems at home turf, Tata Power mulls overseas for expansion

Facing multiple constraints on the home turf, Tata Power is scouting for opportunities in international markets to maximise returns and minimise risks, the company's Chairman Ratan Tata has said.

New Delhi: Facing multiple constraints on the home turf, Tata Power is scouting for opportunities in international markets to maximise returns and minimise risks, the company's Chairman Ratan Tata has said.

In spite of robust growth in the domestic power demand, he said multiple constraints across the entire value chain have made growth in the country very challenging.

"Thus, your company has decided to venture in international markets that offer a greater potential for growth with the strategic intent of maximising returns and minimising risks," Tata said in the company's 2011-12 annual report.

Several issues, ranging from acute coal shortages to environmental hurdles and poor financial health of discoms, are hurting the country's power sector, which has a generation capacity of over 2 lakh MW.

Tata pointed out that the company is actively pursuing business opportunities in other countries and hopes to increase its global footprint in the coming years.

Apart from Tata Power, he chairs boards of many other companies of the Tata conglomerate as well as the main promoter firm Tata Sons Ltd.

Later this year, Tata would be succeeded by Cyrus Mistry, the Deputy Chairman of Tata Sons Ltd.

The annual report stated that certain international opportunities are promising, as returns are predictable due to availability of timely clearances and lower risks.

Tata Power is primarily looking for opportunities in capacity addition across various geographies and distribution opportunities in certain areas, it added.

Currently, the company has a generating capacity of over 6,624 mw including 852 mw from renewable energy sources like wind, hydro, solar, etc. It has also set a target of 20-25 percent of output from renewable sources by 2020.

On if the overseas capacities will comprise renewable energy, Sardana said, "It will be a mix of both conventional as well as non-conventional. We want to achieve our targets and for that we will take whichever route is possible. We are very flexible with any model."

Tata Power has already formed a 50:50 joint venture with the South Africa-based diversified resources company Exxaro Resources to create Cennergi, which will focus on developing power generation projects in South Africa, Botswana and Namibia.

"We are open to partnering with local companies for expanding our footprint in the shortlisted countries where we have already set up offices.

"We have told each of our team in the above mentioned markets that the company is open to investing in these countries. We will invest in whichever project that fetches the development rights faster than the other. That's the way we will go ahead," Sardana said.

These countries have the potential of setting up of nearly 3,000 mw capacity, he added.
In a consortium with Origin Energy and PT Supraco Indonesia, Tata Power is developing Sorik Marapi Geothermal project in Indonesia.

Tata Power in its annual report has said that the exploration phase of the project is expected to end in September 2013.

The company also has investments in various coal companies in Indonesia.

Among others, Tata Power expects to commission the 126-MW Dagacchu hydel project in Bhutan -- where the majority stakeholder is the Bhutanese government -- by 2013.

Noting that it would explore acquisition of energy resources globally, Tata Power said the "ownership of fuel resources would enable de-risking of generation capacities from escalations in fuel cost".

The company's 4,000 MW Mundra ultra mega power project in Gujarat, fired by coal imported from Indonesia, is grappling with losses due to changes in Indonesian regulations that has made the dry fuel expensive. This, in turn, has made the UMPP unviable at existing tariff.


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