It will be a while before Tata Power can benefit from the Supreme Court judgement, which allowed it to sell power to Mumbai's retail customers. Till now, Tata was supplying power to power distributors like Reliance Infrastructure and its bulk consumers like Railways.
One of the major problems is the availability of power. Right now, it has no surplus power that it can sell to new customers. All the power it produces is contracted to be sold to Reliance Infrastructure, the Brihanmumbai Electric Supply and Transport (BEST), and its own bulk consumers.
"Where will you get the power? It is bidding for distribution licences in Maharastra for which it needs additional power," said a Delhi-based power expert, who has been tracking the tussle between Tata Power and Reliance Infrastructure.
The company is increasing generation capacity of its Trombay (a northeastern suburb in Mumbai), plant by 250 mw, which will be available from October this year. This power can be sold to its new customers. There's no power purchase agreement for the power it sells to Reliance (500 MW). Experts feel it can curtail the supply if it can sell the same power itself for a better price.
Tata Power could target creamy customers like malls and multiplex, some of whom pay Rs 10 for a unit of power. "It could sell them power at Rs 7 a unit, which will make them happy and help it earn more money," said Harry Dhaul, director general, Independent Power Producers Association.
Interestingly, it sells power roughly at Rs 3 a unit to Reliance Infrastructure, said an equity analyst tracking Tata Power. Another expert said it sells power to bulk consumers at Rs 4 a unit. Tata Power officials were not available for comments.
Experts say that Tata Power has a good network -- it has a 935 km high-tension and low-tension cable distribution network connecting 17 receiving stations and 85 sub-stations in Mumbai -- - which can be used to monetise the opportunity.
In a media statement on Wednesday, Tata Power said it has significant network capacity as well as ability to supply continuous power for areas in the vicinity of its existing substations to cater to its new customers. "Our immediate plan would be to service consumers around our sub-stations," it said.
With demand for power growing at 8-9 per cent in the suburbs where Reliance operates, analysts feel Tata Power is likely to target new customers in growing areas, where it may have an edge. In fact, both companies were battling for new customers in Mumbai's growing suburbs, which led to this legal dispute.
"Reliance may have an edge in existing areas because of sunk-in infrastructure costs as it can pick and choose customers but Tatas will have an edge in new areas," said an analyst with a brokerage firm, who didn't wish to be quoted.
"The SC order opens a new window of potential business for Tata Power, but there's no surplus power to sell. It won't make an inkling of difference to either of the two companies," said another analyst with a brokerage firm, who didn't wish to be quoted as he is not authorised to speak to the media.
Despite a favourable order, the Tata Power scrip was down 11.18 per cent last week in a volatile market, which was marginally up at 3.3 per cent. The Reliance Infrastructure scrip moved in tandem with the market, and was up 3.60 per cent.