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Rising Power Demand May Help Restart Tata Power’s 4,000 MW Mundra Plant

Tata Power may soon restart its 4,000 MW Mundra thermal power plant located in Gujarat, which has remained shut since July 2025 due to disagreements with client states over fuel cost adjustments. According to the company’s Managing Director and CEO Praveer Sinha, the plant could resume operations before the end of March, provided ongoing negotiations with states conclude quickly.

Speaking on the sidelines of a press conference, Sinha said the company expects a Supplementary Power Purchase Agreement (SPPA) with Gujarat and other states to be finalized soon. However, he did not provide further details about the remaining issues under discussion.

The Ultra Mega Power Project (UMPP) at Mundra has been idle due to disputes with states including Gujarat, Rajasthan, Punjab, Maharashtra, and Haryana over the pass-through of rising Indonesian coal costs. These states are the primary buyers of electricity generated at the plant.

Analysts believe that increasing electricity demand ahead of the summer season and rising global fuel prices could strengthen Tata Power’s position in negotiations. According to analysts at IIFL, the current surge in global liquefied natural gas (LNG) prices may indirectly boost coal demand, potentially supporting coal-based power generation economics.

Recent global energy market developments have intensified the situation. A production halt in Qatar, which accounts for about 20% of global LNG supply, has caused LNG prices in Asia to spike. The average spot LNG price for April delivery in Northeast Asia rose to $22.50 per mmBtu, more than double the $10.40 per mmBtu recorded the previous week, marking the highest level since early 2023.

According to analysts, higher global coal prices could benefit Tata Power in two ways. First, the company holds a 30% stake in an Indonesian coal mine, meaning higher coal prices could directly improve its earnings. Analysts estimate that every $20 increase per tonne in Indonesian coal prices could raise Tata Power’s consolidated earnings by about 10%, with coal typically trading around $70–$80 per tonne.

The shutdown of the Mundra facility has already impacted the company’s finances. Analysts estimate the closure resulted in approximately Rs 1,000 crore in lost profits during the first nine months of FY26.

Market experts also note that the outcome of negotiations over the Mundra plant could significantly influence Tata Power’s stock performance. The company’s shares currently trade at about 10 times its 12-month forward EBITDA, which is below its long-term median valuation.

Earlier in February, Sinha indicated that Tata Power had resolved most issues related to the SPPA with Gujarat, except for one remaining point. The company hoped to settle the matter within a few weeks and begin discussions with other states on similar terms to enable the restart of the Mundra power plant.