In the backdrop of the sliding Rupee, Tata Power is said to be re-thinking at investment plans. It had planned to spend around Rs 1,200 crore for the 2013-14 fiscal. If Rupee declines further against the dollar there will more pressure on Tata Power from foreign exchange side. This would mean that its flagship power project at Mundra, based on imported coal, will need more funding from the company.
On its Mundra project, Tata Power has a foreign loan liability of $1.4 billion. And servicing this debt will be a problem, top executive fo the company said.
Tata Power, in the last two quarters, had taken impairment on its balance sheet on account of Mundra, which were non-cash. These impairments were made on account of change in Indonesian regulations, which changed the project's fuel cost structure. Added to this, exchange rate fluctuations have turned these into cash impairments. The only options left for the company is to go for more and longer hedges against headwinds.
Even if the company were to hedge all its forex exposures, costs of hedging will be 'phenomenal', the top executive said.
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