Tata Power plans to contest Rs 4k-cr Singapore arbitral order

Time of India

4 hours ago

MUMBAI: Tata Power, the utility arm of the Tata Group, plans to contest the $490 million (Rs 4,200 crore) verdict handed down by the Singapore arbitral tribunal. The ruling stems from alleged breaches of confidentiality agreements with investment firm Kleros Capital Partners concerning a potential coal mining project in Russia.
At Tata Power's annual shareholder meeting on Friday, chairman N Chandrasekaran said: "The company is reviewing the contents of the July 1 arbitration award and is discussing with lawyers. It will look at all options, including challenging the decision." He emphasised, "This is top of the agenda."
The Singapore International Arbitration Centre granted Kleros a monetary award totalling more than $618 million. This included $490 million in damages, alongside interest payments exceeding $120 million (calculated at 5.33% from Nov 30, 2020 - when the lawsuit commenced - until payment settlement), and $8 million in legal costs with interest (at 5.33% from July 1, 2025--when the verdict was issued-until final payment).
Tata Power has not accounted for any provisions in its financial accounts in relation to the arbitral award. Since July 1, Tata Power stock has lost nearly 1.5%. On Friday, the stock on BSE closed at Rs 401.
The Singapore arbitral tribunal held that Tata Power breached certain clauses of the non-disclosure agreements it had entered. However, in its FY25 report, the Indian company maintained that Kleros's case was an afterthought and therefore lacked merit.
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Also, Kleros failed to substantiate its project value claims concerning loss of opportunity and compensation negotiations. Consequently, Tata Power believed its position was strong and deemed it unnecessary to make provisions concerning the arbitration ruling, the FY25 report showed.
In another dispute, Adaro International (Singapore) has sought damages of $106 million from Tata Power for alleged contractual breaches.
Tata Power, in turn, has filed a counterclaim for $229 million for losses suffered due to non-supply of coal by Adaro. According to its FY25 report, Tata Power entered into a coal supply agreement with Adaro for its Trombay, Mumbai power plant, which required it to procure a certain quantity of coal annually.
Both parties have initiated arbitration proceedings.
Responding to shareholders' questions regarding ongoing litigation cases, Chandrasekaran said: "With regard to the other arbitration case, the company believes that it should definitely challenge that.
That is something that is waiting for resolution."
The company currently imports 15 million tonnes of coal yearly for its domestic thermal power operations.
Interestingly, Tata Power is reassessing its thermal power strategy, four years after deciding to focus on green energy instead of expanding thermal power.
Chandrasekaran said: "The company had declared that it will not expand in coal-based energy. However, this decision is being reviewed by the board due to the increasing demand for electricity in the country.
The country may not be able to switch off all coal projects in the near future. It may take longer because the country's net zero target is 2070 whereas the company's target is 2045. So to meet the immediate demands of the industry, should there be a need to look at participation in additional coal-based projects is something that the board constantly looks at.
"
He indicated that the company has no intentions to convert its coal-based power plants to gas-based plants. "Our coal plants will be coming to the end of their life in the next 10 to 15 years. After that, we will slowly replace them with renewables".
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