What’s next for Tata Power? Investors await key triggers

livemint.com:

Tata Power Co. Ltd shares stand 7% below their all-time highs, reflecting the company’s focus on expanding its renewable energy business, and a positive outlook on power demand. This optimism is mirrored in its Q2FY24 results with Odisha discoms and the Mundra plant performing well.

Capacity utilization at Tata Power’s Coastal Gujarat Power Ltd at Mundra, increased significantly from 37.5% a year ago to 60.4% on the back of Section 11 tariffs. The Centre had directed thermal generation companies using imported coal, such as the Mundra plant, to operate at full capacity in anticipation of peak power demand for which power producers would be fully compensated. Another source of optimism was the reduction of aggregate technical and commercial, or AT&C losses at Odisha discom.

Tata Power is also taking initiatives to improve collection efficiency for the discoms. Most positives are, however, discounted in the Tata Power share price, leaving investors to wonder about the next key trigger, Rohit Natarajan, analyst at Antique Stock Broking, said. Tata Power’s solar business is widely seen as a growth driver.

Its subsidiary Tata Power Solar Systems reported a strong 68% year-on-year growth in execution. Having said that, Natarajan explained that execution at its solar EPC arm remained volatile and is facing delays in utility-scale projects, which means the segment did well in Q2 but performance must be monitored. Tata Power’s future earnings hinge on the stability of Indonesian coal prices, renewable segment growth, sustainability of Section 11 orders for Mundra, which was extended until June 2024, and growth in solar EPC.