Do not need moratorium on debt repayment any more, says Tata Power

Despite a 40 percent slump in demand for power because of COVID-19, and increasing risk of distribution companies delaying payments, Tata Power has taken back the moratorium request on debt repayment.

The country's largest power generation company had taken a stay on its interest payment obligations for March, as it took time out to assess the impact of COVID-19. This was after the Reserve Bank of India had announced the moratorium incentive for three months.

The country had gone into a lockdown in March, and the current phase gets over on May 17.

The company has since then re-assesed its liquidity position and "does not foresee the need to see the moratorium on debt servicing," Ramesh Subramanyam, CFO and President, Fuel and Logistics, said in a note shared with Moneycontrol. 

"We have managed to get funding under the LTRO scheme as well which will now help us manage our working capital needs better in case the distribution companies delay payments beyond normal periods," Subramanym added.

The RBI on March 27 had introduced the Targeted Long Term Repo Operations (TLTROs) as a tool to enhance liquidity in the system.

The senior executive said the company is now following the original schedule on debt repayment, and has also remitted the amount due for March.

The disruption caused by COVID-19 has worsened the situation in India's power sector, which was already reeling under low demand as economic activity took a hit. The demand has further slumped now.

Excess power

At a time when demand usually peaks, because of the onset of summer, the sector, on the other hand, has seen a plummet. While nationally, the demand usually peaks to about 180GW during the season, the lockdown has reduced the appetite for  power. The demand fell to 120 GW in the first two weeks of the lockdown.

Subramanayam said the low demand will lower capacity utilisation at plants. In fact, the danger is of peak load factors going below the minimum threshold of 55 percent.

While the slump will impact Tata Power's topline, the CFO reiterated that "the returns from these businesses are also regulated based on assets deployed. The return profile of our business allows us to cover our fixed costs and provide us assured returns which I would say is typical of regulated businesses like us."

In an investor presentation that the company had shared in 2019, Tata Power had said that 34 percent of its capacity (conventional) is in regulated generation, and 24 percent (renewable capacity) under 'healthy return regime.'

Tata Power is also banking on the government coming to the aid of distribution companies, who need financial help to clear their dues.

The company, which had in April exited its South African JV for about Rs 650 crore, reiterated that it continues on its divestment plan despite the COVID-19 challenges.

Subramanyam accepted that the lockdown has made negotiations 'a little difficult,' but added that the company is in advanced discussion to sell another overseas asset.