#1TATA POWER TATA TATA POWER Investor Presentation April 2019 Lighting up Lives! TATA 1#2TATA POWER Disclaimer This document does not constitute or form part of and should not be construed as a prospectus, offering circular or offering memorandum or an offer to sell or issue or the solicitation of an offer to buy or acquire securities of the Company or any of its subsidiaries or affiliates in any jurisdiction or as an inducement to enter into investment activity. No part of this document, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. This document is not financial, legal, tax or other product advice. This presentation should not be considered as a recommendation to any investor to subscribe for, or purchase, any securities of the Company and should not be used as a basis for any investment decision. 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TATA 2#3TATA TATA POWER Indian Power Sector - Challenges galore Low Capacity Utilization: Installed capacity (345 GW) is twice of the peak demand (177 GW) resulting in low utilization 24 GW thermal assets stranded putting pressure on the banking system While Energy demand has grown, it has not kept pace with growth in Indian Economy Capacity glut & weak SEB finances impacted thermal PLFs; FY18 saw initial signs of reversal of decline in PLF Stress on financials of Discom not yet resolved: UDAY impactful with shifting of losses & reduction of AT&C losses but ARR-ACS gap needs to be addressed Cross subsidy burden on Sharp increase in receivables stretching developers and lending system Declining trend in Solar tariffs: Intense competition coupled with declining module prices driving tariffs down; renewable tariffs have achieved grid parity Discoms preferring 3-5 year PPAs and avoiding LT PPAs for thermal assets Power demand & GDP growth data 12 10 8 B 4 2 0 GDP growth (%) Power demand growth (%) Power demand to GDP growth (x) 1.4 1.2 1.0. 0.8 0.6 04 0.2 FY10 FY11 FY12 FY13 FY14 FY15 FY16 Source: MoSPI, CEA, I-Sec Research ACS-ARR Gap (Rs p.u.) 0.6 0.51 0.5 0.45 0.4 0.3 0.2 0.1 FY17 FY18 7MFY19 0.35 0.29 0.27 0 Dec 16 Mar 17 Dec 17 Jun 18 Sept 18 Discoms' dues increasing in FY19 Wind power-minimum tariffs Solar power - minimum bids 9 8.40 Discoms' outstanding dues (Rs bn) 300 8 7.00 7 8.50 250 High revenue dependence on Industrial segment Industrial/Commercial Domestic Agriculture Others (Rs/kWh) 5.27 5.03 5.07 4.77 4.37 4.34 100.0% 10.2% 9.4% 259.8 248.2 7.7% 234.0 80.0% 22.4% 23.3% 189.7 200 184.1 60.0% 161.1 27.09 150- 5.05 4 3.48 100 m N 3 2.44 2.43 40.0% 58.8% 20.0% 40.4% 2.47 50 2. + + + FY12 FY13 FY14 FY15 FY18 FY17 FY18 0.0% 0 Mar'18 % of power sale revenues Apr'18 May 18 % of power sale volumes Jun'18 Jul 18 Aug 18 Source: Industry, CERC, I-Sec Research; FY17 data for wind tariff is bid-based Source: PFC AR 16, 1-Sec research A Tata Power's controlled aggression in Renewables driving healthy business growth 3#4TATA POWER ..light at the end of the tunnel? Demand augmentation: ➤ Peak demand surge highest ever Peak and base demand growth (YoY %) 1000 9.0 13GW in 7MFY19 over FY18 - probably the 800 70 8.0 50 40 SAUBHAGYA will likely result in 8-10% peak demand increase, and 3-5% base demand increase initially Load shedding reduction contributed >60bps to FY18 power demand growth Enough capacity to sustain for next 4 years - What after that? Capex in generation required soon to address demand growth and retirements of inefficient and old plants Stressed asset resolution to be driven with growth in demand and the Samadhan and Parivartan schemes 3.0 20 1.0 Peak demand growth (YoY%) Base demand growth (YoY%) W FY18 TATA 7MFY19 Capacity addition thermal capacity addition negative in 7MFY19 on plant retirements Gas and Other thermal Nuclear Hydro Wind Solar (GW) □ Coal 40 35 30 25 20 Consolidation in Renewables Continued thrust on renewables; Rationalization of bids in recent rounds Green Transmission Corridor positive for growth Recent regulatory orders upholding existing PPAs a positive Distribution Reforms UDAY Scheme has been impactful but tariff reforms remain the last mile ➤ Private participation in distribution must for Discoms' turnaround FY 12 FY13 Source: CEA, I-Soo Rocosroh AT&C loss trend 0 34.9% 35.2% 0 FY14 FY15 FY18 AT&C loss 34.8% 33.1% 29.5% 0 26.8% 26.6% 0 0 FY04 FYOS 27.7% FY19E FY20E FY10 26.4% 25.5% FY11 22.6% 25.7% FY12 FY13 FY14 FY15 FY16 FY 17 23.0% 20.3% 21.5% 19.0% FY 18 H1FY19 FY06 FY07 FY08 FY09 Source: Ministry of Power, PFC I-Sec Research Calibrated Growth strategy to secure market leadership with sustainable profitability 4#5TATA POWER ΤΑΤΑ A POWER Tata Power Lighting up Lives! ΤΑΤΑ 5#6Consolidated 11 GW portfolio with 30% in clean, TATA POWER non-fossil power CONVENTIONAL GENERATION (EX - CGPL) TATA TRASNSMISSION & DISTRIBUTION ASSURED RETURNS MERCHANT REGULATED - TRANS. REGULATED - DISTRN. MW MW CKM MIn Cust Regulated 2,855 Merchant + Short term PPA 246 Mumbai 1,188 Distrib. License 2.4 Fixed RoE 549 Powerlinks JV 2,328 DF 0.1 Total 3,404 Total 246 Total 3,516 Total 2.5 CGPL, COAL & INFRA CGPL + KPC RENEWABLES + TATA POWER SOLAR EPC WIND SOLAR SERVICE BUSINESSES OTHER BUSINESSES Size MW MW Businesses CGPL 4,150 MW Feed in Tariff 931 Feed in Tariff 975 Construction & O&M Services Coal Mines 21 MT (Eq share) LT PPA Bid 230 LT PPA Bid 320 Value Added Distribution Services Ships 3 own & 3 lease Total 1,161 Total 1,295 Tata Power Trading 100+ years experience of the Indian Power Sector and pioneer with a number of firsts ➤ 34% capacity (conventional) in regulated generation and 24% (renewable capacity) under healthy return regime; Mundra hedged with Coal Companies Integrated Solar EPC business with 1.5 GW of large scale capacity installed till date Scaling up Renewables, Distribution and Services business to achieve market leadership#7TATA POWER Robust business fundamentals Revenue 35000 30000 28526 28921 27287 25000 20000 15000 10000 5000 0 FY 16 FY 17 7000 6219 6193 6000 5000 4000 3000 2000 1000 0 FY 16 EBITDA TATA PAT* All figs in Rs Crores 1800 1549 1600 1375 1400 21919 1200 1000 849 760 800 600 400 200 0 FY 18 9M FY 19 FY 16 FY 17 FY 18 9M FY 19 6380 12000 Underlying EBITDA 10104 10000 8634 4874 7827 8000 6000 4000 2000 7229 0 FY 17 FY 18 9M FY 19 FY 16 FY 17 FY 18 9M FY 19 * Before exceptional items Despite pressures from under-recovery in CGPL, robust underlying EBITDA growing by 2 ~ 30% in last 3 yrs. 7#8TATA POWER Conventional Generation - A steady warhorse TATA Plant MW Remarks Reg Equity Before Eliminations EBITDA All figs in Rs crs MO Thermal 930 100% Regulated with 5 yr PPA (BEST & TPC-D) Rs 1,803 crs 3,000 2,494 MO Hydro 477 2,500 2.565 1,855 2,000 Jojobera 428 Maithon 1,050 100% regulated 74% JV; 100% regulated Rs 284 crs 1,500 1,000 Rs 1,582 crs 500 IEL (Captive) 375 74% JV; Negotiated PPA N/A FY 17 FY 18 9M FY 19 Zambia Hydro 120 50% JV; 100% Fixed RoE N/A PAT CKP (Captive) 54 30% JV, Fixed RoE N/A 1,100 1,056 1,050 Haldia 120 100 MW Merchant; 20 MW PPA N/A 985 1,000 950 914 Bhutan Hydro 126 Merchant Capacity N/A 900 850 3,650 800 FY 17 FY 18 9M FY 19 Total • • • Cost Competitive, Profitable & Sustainable Generator Technology Pioneer through through operational excellence, Digitalization & Al Value Added Services through Niche Solutions Responsible Generator of choice for Community & Employees 3.00 2.50 2.00 1.50 1.08 1.00 0.50 Debt/Networth Leverage 2.45 Debt/EBITDA (FY 18) Stable returns with maintenance capex & cost optimization providing growth 8#9TATA POWER Conventional Generation - Value Drivers Existing Business Giving Consistent Returns RCM, Digitalization & Artificial Intelligence push improving availability & generating savings Improve Cost Competitiveness Growth in Stressed Assets 24 GW of stressed assets with almost 10 GW with FSA/PPA etc. Resurgent Platform for growth Reliable & efficient operator preferred by lenders Additional returns from O&M Growth with high returns Captive Growth Experienced captive operator Synergies from Group Secured Payments, Assured Returns - Low Risk Assured stable returns Construction Service & Plant Optimization End to end implementation skills Owner/Utility Experience High margin, low capex business model TATA 9#10TATA POWER T & D - opportunities to leverage experience Before Eliminations Transmission CKM Reg Equity Mumbai 1,188 Rs 1,164 crs 2,500 2,084 2,000 Powerlinks 2,328 Rs 468 crs 1,500 Total 3,516 Rs 1,632 crs 1,000 500 Distribution MIn Cust Reg Equity FY 17 Mumbai License 0.7 Rs 830 crs 900 Delhi License 1.7 Rs 1,371 crs 850 823 Ajmer DF 0.1 N/A 800 Total 2.5 Rs 2,201 crs 750 700 EBITDA 2,299 TATA All figs in Rs Crs 1,826 FY 18 9M FY 19 PAT 855 735 Track record of turning around Distr. Business achieving significant loss reduction • Adopting and implementing 650 FY 17 FY 18 9M FY 19 latest 2.50 technologies (AI/IOT) to offer superior services to customers. First mover advantage in integrated solutions; Leverage presence across the value chain to provide seamless integration 2.00 1.50 1.00 0.71 0.50 Debt/Networth Leverage Assured returns with a drive towards asset light business 2.16 Debt/EBITDA (FY 18) 10#11TATA POWER T&D - Value Drivers Existing Business Giving Consistent Returns Growth Digitalization, Al & IOT Driven customer interactions Innovative & customised solutions Stable return portfolio Several License as well as DF opportunities Expertise of turning around Distn & seamless integration Huge Growth Integrated power solutions offering Evaluating Trans landscape Collaboration with Tata Projects Options TATA Niche Value Added Distribution Services Expertise in Distribution service offerings Pioneer in systems & technologies Presence across value chain High margin, low capex business model 11 11#12TATA TATA POWER Renewable Developer Business: Overview Renewable Developer Company Overview Tata Power is 6th largest Renewable energy player in India with a portfolio of 2,064 MW (Tata Power assets, TPREL & Walwhan) operational and 500 MW under construction in India and 230 MW operational in South Africa Balanced portfolio with complimentary renewable energy sources and presence across 11 states, thereby de- risking portfolio with an average tariff of ~ Rs. 6 per kWh - Robust platform to benefit from the huge market potential to increase the capacity Renewable Project Portfolio The Tata Power Company Limited 379 MW Tata Power Renewable Energy Limited (standlone) Indo Rama Renewables Jath Limited 30 MW Operational 724 MW and 500 MW in pipeline 1,010 MW Walwhan Renewables Energy Limited Others including South African wind assets 292 MW Vagrai 21 MW ~2.5 GW of Operating capacities and 500 MW in pipeline; future growth in Solar 12 12#13TATA POWER A well diversified Renewable Portfolio INDIA TJ Solar 1295 MW JAMMU & KASHMIRI Wind HIMACHAL PRADESH 931 MW PUNJAB HARYANA DELHI UTTARAKHAND UTTAR PRADESH RAJASTHAN GUJARAT DAMAN & DIL DADRA & NAGAR HAVELI ARABIAN SEA LAKSHADWEEP (INDIA) MADHYA PRADESH MAHARASHTRA GOA KARNATAKA TELANGANA ANDHRA PRADESH CHHATTISGARH BIHAR ; ŠKKKIM JHARKHAND WEST BENGAL ODISHA (ORISSA) PUDUCHERRY TAMIL NADU KERALA Palk Strain NDIA N ARUNACHAL ASOM PRADESH (ASSAMI NAGALAND MEGHALAYA MANIPUR TRIPURA MIZORAM BAY DE BENGAL ANDAMAN & NICOBAR ISLANDS (INDIA) Map not to Scale Copyright © 2012 www.mapsofindia.com C E A W State wise installed capacity TATA State GJ RJ MP MH AP TS KN PB TN UP BH Total Solar 100.0 66.0 130.0 128.0 205.0 15.0 314.0 36.0 249.0 1.0 40.0 1284.0 Wind 193.6 185.0 44.0 238.6 100.0 0.0 50.4 0.0 120.0 0.0 0.0 931.6 Total 293.6 251.0 174.0 366.6 305.0 15.0 364.4 36.0 369.0 1.0 40.0 2215.6 13#14TATA POWER Solar EPC Business 300 MW Cell Module Manufacturing Capacity (MW) RAJASTHAN 158.5 GUJARAT 164.4 MADHYA PRADESH UTTAR PRADESH 7.8 JHARKHAND 103.9 CHHATTISGARH 5.2 4.8 ORISSA 34.7 MAHARASHTRA 198.9 TELANGANA 22.5 ANDHRA PRADESH KARNATAKA 478.7 TAMIL NADU 38 233 LARGE PROJECTS 1.45 GW 400 MW In-House Manufacturing of Solar Cells and Modules Over 1GW modules shipped globally TATA Rated as Tier-1 bankable manufacturer by several rating agencies such as GTM, BNEF ➤ Highly automated manufacturing lines ensuring best quality product EPC Capabilities for Self and Third Party Projects With over 1.5GW of EPC Projects Commissioned, TP EPC arm is one of the biggest in India. ➤ Strong orderbook of ~1 GW Huge potential to leverage Group business opportunities ➤ Strong Capabilities in key areas ☐ Engineering and design optimizations Low cost procurement might Cost light project execution Intelligent O&M systems for predictive maintenance India's No.1 Rooftop EPC Company for last 4 yrs as per BTI 246 MW till date serving residential, Commissioned government, commercial and industrial segments. ➤ Executed 12 MW world's largest rooftop solar and commissioned India's largest vertical solar farm. Poised well to grow with fast growing rooftop market in India 14#15TATA POWER Integrated Renewables Business Financials 6,000 5,000 3,876 4,000 3,000 2,000 1,000 Revenue 5,274 3,000 2,500 3,797 2,000 1,828 1,500 1,000 500 FY 17 FY 18 9M FY 19 600 500 400 300 182 200 100 FY 17 PAT TATA EBITDA 2,711 All figs in Rs crs 2,138 FY 17 FY 18 9M FY 19 5.00 514 4.50 451 4.00 3.50 3.00 2.50 2.00 1.45 1.50 1.00 0.50 FY 18 9M FY 19 * FY 17 financials for Walwhan is from Sept 16 Leverage 4.39 Debt/Networth Debt/EBITDA (FY 18) Robust EBIDTA growth generating significant cash for incremental capacity addition 15#16TATA POWER CGPL, Coal & Shipping Companies: PAT TATA External Debt All figs in Rs crs 2,000 1,500 12,000 1,423 9,989 10,000 979 8,538 797 1,000 8,000 7,072 500 5,818 6,000 FY17 F18 9M FY 19 -500 -1,000 -855 -1,500 -2,000 4,000 2,000 -1,408 CGPL Coal Cos+Shipping -1,363 CGPL Coal SPVS FY 18 9M FY 19 USD Per Tonne Consolidated -CGPL + Coal Cos 40 30 20 10 80 70 60 8222° 0.60 1.00 0.84 0.92 0.90 . 0.80 0.70 0.60 61.5 68.2 62.9 65.7 0.50 49.5 54.5 0.40 Rs per Unit 0.30 0.20 0.10 FY 17 FY 18 9M FY 19 Coal FoB - CGPL FOB Sales Coal Cos Under recovery in CGPL • Sharp rupee depreciation & increased coal prices widened CGPL losses. Coal blending increased to reduce the losses by securing higher discount to market prices DMO obligations have put the natural hedge under stress. However, Company refinanced CGPL loans to defer part of the repayment obligations reducing the gap funding significantly. Also, overall reduction in debt at CGPL + Coal SPVs 16#17TATA POWER ΤΑΤΑ A POWER Growth strategy Lighting up Lives! ΤΑΤΑ 17#18TATA POWER 3S Strategy to achieve leadership and sustainability TATA 1 141 Simplify Reorganized businesses internally to drive focused operation & growth • Divest and exit from non- core investments as well as subscale assets to free up capital • • 2 Together WE Achieve More Synergize Aligning with initiatives in new/emerging business areas at the Group level for maximum business impact Synergize within Tata Group and Tata Power Group • ● 3 GOAL Scale/Stretch Achievement of scale in focus businesses Value added businesses with high Rol to make significant contribution to profitability Improve return on capital employed in existing businesses Focused Strategy for unlocking value and drive future growth 18#19TATA POWER Key Themes VALUE DRIVERS DEBT INCOME Calibrated Growth Model Deleveraging Balance Sheet CGPL Resolution 19 19 TATA#20TATA POWER Calibrated Growth Model TATA Renewable Growth Asset Light Model Value Added Business 20 20#21TATA POWER Building capability for the future TATA • Steady businesses generating Rs 10,000 crores (~USD 1.5 Billion) operational cash flow every year. Our refinancing capabilities have helped to achieve sustenance of debt service providing more time for resolution of CGPL under-recovery. Current cash flows can sustain maintenance capex and approx. 500 MW of annual growth. The high Cash RoE from renewable business can fund further capacity additions Parallel efforts in divestment of non-core investments & proceeds from Arutmin to assist in bringing debt down to levels of Rs 40,000 crores (~USD 6 Billion). Regulatory changes in Delhi to assist in realization of Regulatory Assets over next 3 years. Funds to be used for growth and/or reduction of debt. Resurgent Venture to allow capacity addition at lower equity outlay and provide avenues for high margin plant optimization and operational services. Focus on value added services and micro grid solutions to address bigger issues Robust platform to become a market leader in Renewables 500 MW of minimum annual growth in base case 21#22TATA POWER Robust Renewable Growth Strategy Non-Fossil based capacities to be 40%- 50% of the total portfolio 500 MW of projects in pipeline, further bids being pursued Adequate potential capacity still available to be tapped Growth plans to be pursued with a cautious approach; capability to tap inorganic opportunities TATA 22 22#23Renewables sector outlook- more opportunities for TATA POWER growth Wind Solar 750 GW 102 GW Small Hydro 20 GW Bio-Energy 途 25 GW 5.3 Solar Tariff (Rs/unit) 4.6 4.3 4.4 4.4 TATA 3.5 3.3 2.9 2.7 2.4 2.5 Apr Jun Oct Jan Jul Oct May Jul Sept Dec Feb 15 15 15 16 16 16 17 17 17 17 18 India has a target of 175GW by 2022 To achieve this ~105GW is to be added in next 4 years Highest growth potential in solar rooftop generation Competition is high in renewable bids adding stress on margins 3.5 Wind Tariff (Rs/unit) 2.9 2.6 2.6 2.4 April 17 Oct 17 Dec 17 Feb 18 Mar 18 India green energy resource potential - 900GW offers huge growth opportunities 23 23#24TATA POWER Tata Power Renewable's competitive edge ✓ EPC cost / Module Pricing Engineering optimisations in own manufacturing / EPC, Long term tie up for module procurement, Better quality monitoring in procurement being a manufacturer ✓ Low financing cost and ability to raise long term funds Demonstrated access to low cost, long tenor funding from both domestic & off shore sources ✓ O&M cost ✓ ■ Shared cost, shared spares, intelligent module cleaning Energy Efficiency/ AC DC Packing Technological intervention to improve efficiency Tata Power to leverage on low cost funding, in-house EPC to be competitive TATA 24#25TATA POWER Leveraging Platform Structure - Resurgent Power TATA To acquire Thermal, Hydel and Transmission Assets in India Platform incorporated with USD 830 M commitment from following sponsors / Investors: -Tata Power (26%) -ICICI Bank (10%) -KIA Tata Power will provide strategic, operational and financial advise Five to six generating assets, shortlisted and being evaluated; transmission and hydel assets under initial assessment Prayaagraj Power Generation Company Limited to be the first acquisition through Resurgent Power -SGRF Huge inorganic growth potential through Platform. Similar structure can be used for Renewables Growth 25 25#26TATA POWER Future trends - Shift to Integrated Solutions Conventional Generation Service Provider One-way Communication Isolated Systems Supply Management Conventional Transport Monopoly Business 賽 Coal Based Generation m Changing Paradigms Distributed Generation Solutions Provider Two-way Communication Connected Systems Demand management E-Mobility Competition Driven Business Renewable Generation Transformation phase in sector to offer new opportunities TATA 26#27TATA POWER Opportunities ahead DRIVERS Smart Metering Rooftop Solar LED Street Light System ESCO EV Charging System D National Tariff Policy & UDAY National Solar Policy Energy Efficiency & UDAY National Electric Mobility Mission Home Automation Plan Smart City Mission INDIA POTENTIAL 270 Million Meters 40 Giga watt 9 Million Points 20 million 4W EV & 1 million charging stations 80 Million Homes TATA Tata Power is fully geared to capitalize on opportunities in Value Added Distribution Services as well as incubate innovative projects such as Storage & Micro-Grid 27#28TATA POWER Distribution - Grid level opportunities TATA Gujarat* Punjab Rajasthan Maharashtra Karnataka* Uttar Pradesh Madhya Pradesh Telangana Andhra Pradesh Tamil Nadu Notes Source: UDAY website, Power Finance Corporation, Ministry of Power report on "State Distribution Utilities- Fifth Annual Integrated Rating" BRIDGE TO INDIA, 2017 Current State: ACS-ARR Gap: 29p/kWh AT&C Loss: 21.8% DISCOM rating A to A+ B to B+ C to C+ Reduction in AT&C losses Percent bonds issued Good Bad Reduction in tariff deficit AT&C Aggregate Technical and Commercial Losses * There is no debt restructuring component for these states. Although the debt has reduced in all cases, but most states have been unable to reduce AT&C losses as well as ACS-ARR gap as per the yearly targets. The full impact of transfer of loans and losses on State Govt. finances will be seen in FY20, Losses which is expected to reduce in FY 19 from the FY 18 levels, is again again expected to balloon in FY 20 to more than the FY 18 levels driven by SAUBHAGYA scheme This will restrict the ability of State Govts. to raise funds for other development objectives and will put huge pressure on them to privatize distribution circles/ adopt franchisee model. Post UDAY, high AT&C losses states would require greater private sector participation 28#29TATA POWER Distribution - Microgrid opportunities The Need Only a small fraction of rural households (10%) electrified Over 3.5 crore households in India are yet to be electrified Nearly 80% of rural households in the electrified villages in some states of India receive power supply <2 hrs. Nearly 62 crore people in Africa (2/3rd of the population) are without electricity supply effective A localized cost microgrid will be able to ensure universal access to electricity MICRO GRID Electrified 53,60,482 0 To Be Electrified 3,07,81,268 सौभाग्य Household Electrified: 53,60,482 Out of 3,61,41,750 TATA • The Solution Packaged solution "Utility In a Box" with solar, storage and biomass Development of low cost and high efficiency appliances & meters Intelligent smart meters and inverters Promoting anchor economic activities in villages Microgrid pilot projects by Tata Power underway in Bihar and UP • The aforementioned solutions can be applied to the unelectrified parts of sub-Saharan Africa too Microgrid can have an immense growth potential 29 29#30TATA POWER Key Focus Areas for growth EV Charging and Storage Smart meters and cities LED LED Lighting Microgrid Home Automation and Smart Homes TATA Transmission & Distribution Distributed Generation and Rooftops Generation: Renewable 30#31TATA POWER Deleveraging the Balance Sheet DEBT INCOME Monetization of Non-Core Assets Targeted Leverage TATA 31#32TATA POWER Monetization of non-core investments Sold holdings in IEX (Rs 199 crs) & Tata Comm (Rs 2,150 crs) Realized USD 160 M out of USD 400 M from Arutmin Sale Sale of Defense business under regulatory approvals - Rs 1,050 crs to be received on approvals and RS 1180 crs on contract realization Tata Projects classified as "Assets held for sale" 2 Quoted investments ~ Rs 150 Cr, Other assets Classified as "Assets Held for Sale"- Nelito, Tata Ceramics, NELCO Rs 8,000 crores worth of divestments are planned out of which 2 - Rs 3,300 crores of consideration realised (incl. Arutmin) 32 32 TATA#33TATA POWER De-leveraging the Balance Sheet All figs in Rs crs PARTICULARS STANDALONE CONSOLIDATED Rupee Forex Total Rupee Forex Total Long term 8,338 8,338 22,722 3,782 26,504 Short term 6,942 19 6,961 14,275 2,604 16,879 Current Maturity of LT 1,758 1,758 3,427 81 3,508 Total Debt 17,038 19 17,057 40,424 6,467 46,891 Less: Cash 28 1,090 Net Debt 17,029 45,801 Equity 15,649 20,418 Net Debt to Equity Q3 FY19 1.09 2.24 Q4 FY18 1.14 2.48 Company has used 510 M of proceeds received from Tata Communications stake sale & IEX, realization from Arutmin sale and dividend from coal companies to reduce debt Options to monetize other assets under active consideration. 33 TATA#34FY17 5.28 FY17 0.87 TATA POWER Targeted Leverage FY18 STANDALONE D/E 0.87 STANDALONE NET DEBT/EBITDA 5.02 0.65 MONETIZATION OF NON- CORE 7.57 FY17 7.36 2.72 CONSO NET DEBT/EBITDA CONSO D/E 2.66 2.28 FY18 POST MONETIZATION OF NON-CORE FY18 3.96 MONETIZATION OF NON-CORE FY17 FY18 POST POST MONETIZATION MONETIZATION OF NON-CORE BASED ON UNDERLYING Low dividend yielding assets monetization to boost RoE, EPS Leverage too improved through monetization of non core assets EBITDA 34 6.81 4.40 TATA#35TATA POWER Resolution of CGPL under-recovery Compensatory Tariff A Coal Hedging Coal B Blending C Other Initiatives 35 55 TATA#36TATA POWER CGPL - High Powered Committee report on Compensatory Tariff TATA Gujarat Government initiated a High Powered Committee Report to find out solutions for the imported coal based power projects. HPC took inputs from earlier reports and engaged with all stakeholders and made various recommendations on 3rd Oct 18. Supreme Court passed an order that the HPC's report does not infringe upon its earlier order and directed CERC to hear all parties and pass an order in 8 weeks. As the other four states' procurers were not party to this agreement, discussions are in progress with them to secure their decision on the compensatory tariff. ➤ After receiving procurers' decisions, Company to approach CERC for their approval of comp tariff. Parameter Effective Date FOB Under- recovery • Recommendation/Proposal • Proposed to be made effective prospectively from 15th October 2018. No past losses. Compensation/Relief only for FOB under recovery subject to cap of HBA(6322 CV) Index of USD 110/MT(on monthly basis). Cap of HBA(6322CV) Index to be reviewed once in five years. No compensation against Fuel Transportation & Fuel Handling under recovery Lender's Sacrifice A notional fixed deduction of 20 paisa per Kwh against Energy Charges Mining Profit 100% of mining profit from Indonesian mining company receivable in India pertaining to Mundra offtake subject to minimum of 15 Paisa per kWh. Extension for 10 years. PPA Extension • Fuel Cost passed through. No mining profit sharing and Lenders sacrifice. Capacity Charges for the extension period adjusted with last year Capacity Charges (Current PPA) and consequential increase in O&M expenses plus additional capacity charges on R&M Cost in accordance with prevailing Regulations 36#37TATA POWER Natural hedge between Mundra & Coal Cos Fig in Rs crs Generation at Mundra 9 Month 9 Month CGPL FY 18 FY 17 FY19 FY18 Revenue 5,094 4,556 6,419 6,109 EBITDA PAT (117) 150 16 (1,363) (871) (1,408) 552 (855) Coal mining & Coal Infra Companies Coal & Infrastructure Business Revenue EBITDA PAT Net PAT 9 Month 9 Month FY 18 FY 17 FY19 FY18 6,585 6,938 8,641 7,123 2,030 2,346 2,889 1,792 979 1,197 1,423 797 (384) 326 15 (58) TATA Natural hedge has worked in favor till FY 18 ➤ Lower prices due to slow Chinese demand and the Indonesian DMO regulation in FY 19 led to realization in Coal Cos reducing ➤ Consolidated PAT turned negative in FY 19 due to above DMO impact Company refinanced the ECB Loans with rupee bond and loans that have pushed out the repayments and stopped the gap funding requirement. This will provide breathing room for Tata Power before a long term resolution is found 37#38TATA POWER Blending to reduce landed costs. Optimizing Coal Blending to reduce Under-recovery CGPL is firing different Off Spec Coal to reduce the fuel cost CGPL has significantly changed the coal blend mix to reduce the coal cost Sale of additional Power beyond 80% CGPL is in discussion with Procurers to sell its power beyond 80% at a higher tariff than that in PPA to reduce losses HCV - 10% Coal Blend in FY 18 Coal Blend by Dec 2018 MCV - 77% MCV - 43% Reduction in Coal Cost LCV - 13% LCV - 37% HCV - 20% 38 38 TATA#39TATA POWER Other Initiatives TATA Competitive Coal Procurement Alternate Sourcing of Coal Lower cost of financing O&M Practices Around 2-3 MMT of coal being procured at the discounts ranging from 5% to 8% on sustainable basis Exploration of Russian mine underway with a no-go decision in next 12-15 months. This can supply 8 MTPA of coal at cost plus basis. Development to take 3-4 years Achieved 200 bps reduction in Interest cost and repayment tenure was elongated for Rupee loans. Refinanced ECB loans at similar costs with elongated tenor Sustainable savings through better Outage planning, reduced Insurance cost, aux consumption optimization etc. ➤ Mundra and coal assets continue to demonstrate natural hedge ➤ Development of Russian Coal mine being pursued ➤ Every possible solution for Mundra being explored. While CGPL pressure is there, Tata Power is now focusing on growth to forge market leadership and deliver sustainable profitability. 39#40TATA POWER Key take away TATA An Integrated player across the value chain, well positioned to withstand sectoral challenges and capitalize on opportunities Underlying business performance robust with regulated conventional and good renewable assets Thrust on renewable growth (without compromising on returns) Shift from asset heavy to asset light model thru Platform and Value Added Services Deleveraging through monetisation key focus to strengthen the balance sheet Coal Business continues to provide hedge for Mundra; coal blending & other initiatives for cost reduction to continue to contain losses 40 40#41TATA POWER Disclaimer: The contents of this presentation are private & confidential. Please do not duplicate, circulate or distribute without prior permission. Private and Confidential | Thank You! Website: www.tatapower.com Email ld: [email protected] Contact: +91 (0) 2267171305 TATA 41