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Tata Power profit slumps 79% in third quarter as expenses mount

Indonesian coal prices add to company's woes

Tata Power's total cost of the fuel jumped more than 28% in  third-quarter.© Mint/Getty Images

MUMBAI (NewsRise) -- Tata Power, India's largest private electricity producer, reported a worse-than-expected 79% slump in third-quarter profit, hurt by surging expenses and a fall in income from Indonesian coal units.

For the quarter ended in December, Tata Power posted a consolidated net profit of 1.27 billion rupees ($18 million), compared with 5.91 billion rupees in the year-earlier period. Analysts surveyed by Refinitiv poll were expecting a net income of 3.95 billion rupees. The year-earlier quarter included an exceptional gain of 2.99 billion rupees related to the deferred tax on sale of an investment.

Total revenue from operations jumped more than 21% to 77.07 billion rupees, the company said in a stock exchange filing on Monday. Profits of coal units came under pressure due to domestic market pricing obligations in Indonesia and increase in fuel prices, Tata Power said. The total cost of the fuel jumped more than 28% in the quarter.

Revenue from the core power generation business expanded more than 14%. Operating earnings from coal companies slumped 45%.

Tata Power has been grappling with shrinking profits as it incurred losses at its power plant in Mundra in the western Indian state of Gujarat. The project, which depended on imported coal from Indonesia, ran into losses after the Southeast Asian country raised levies on the export of the fuel.

Indian power producers sought higher tariffs to cover the increased cost, but distribution companies resisted, dragging the case first to the regulator and then to India's highest court. Last year, the Supreme Court allowed Tata Power and other electricity producers to renegotiate their agreements with state-run distributors, offering a ray of hope to the companies grappling with staggering losses.

Losses at Mundra widened to 4.67 billion rupees from 2.27 billion rupees a year earlier.

The company is in discussion with various state governments and state electricity distributors regarding the Mundra power plant and is expecting a resolution soon, Tata Power said in a statement. The proposal will then be submitted to the Central Electricity Regulatory Commission, it added.

Meanwhile, operating profit at the company's renewable energy business rose 9% due to a capacity addition of 356 megawatts. Tata Power is aiming to draw up to 40% of its generation capacity from clean energy sources by 2025. It has also set a target to expand the capacity of its renewable energy unit to 20,000 megawatts during this period.

The thrust on renewable energy comes as India seeks to cut reliance on coal-based power plants that account for nearly three-fourths of the country's power generation amid rising concerns about pollution.

The government has also set an ambitious target of increasing clean energy capacity to 175,000 megawatts by 2022 and is aiming to boost the share of non-fossil fuel in total installed power capacity to 40% by 2030.

Tata Power shares fell 4.3% in Mumbai trading, while the benchmark S&P BSE Sensex index lost 1%.

--Dhanya Ann Thoppil

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