NTPC’s SJVNL ac­qui­si­tion likely this year

Hi­machal govt that blocked deal last year on board now

Financial Chronicle - - FRONT PAGE - SUBHASH NARAYAN New Delhi

AF­TER kick­start­ing con­sol­i­da­tion in the oil sec­tor, the gov­ern­ment plans to un­der­take a sim­i­lar ex­er­cise in the power sec­tor this year, al­low­ing state-owned NTPC to buy out the en­tire cen­tral gov­ern­ment’s eq­uity in hy­dropower gen­er­a­tor SJVNL.

Sources close to the de­vel­op­ment told Fi­nan­cial Chron­i­cle that the Cen­tre has more or less ad­dressed the is­sues that led to Hi­machal Pradesh gov­ern­ment, the other mi­nor­ity stake­holder in SJVNL, block­ing the deal last year. This has paved the way for the process to be com­pleted in FY19, al­low­ing NTPC to speed up hy­dropower gen­er­a­tion af­ter the failed at­tempt last year to ac­quire projects un­der a ten­der­ing process, they added.

SJVNL is a cen­tral sec­tor joint ven­ture PSU with 63.93 per cent eq­uity hold­ing with the Gov­ern­ment of In­dia, 26.93 with Hi­machal Pradesh and the bal­ance 9.22 per cent with pub­lic. At Thursday’s share clos­ing price of Rs 30.30 on BSE, the pro­posed share buy­out may en­tail a to­tal in­vest­ment of about Rs 7,600 crore by NTPC.

The main ob­jec­tion to the deal came from Hi­machal Pradesh gov­ern­ment last year as the state ap­pre­hended that the pro­posed ac­qui­si­tion would erode its eq­uity stake and the state will hardly be left with any say in the new en­tity.

The state gov­ern­ment owned just 25.52 per cent stake in SJVNL last year that has now in­creased to over 26 per cent. This will al­low the Hi­machal Pradesh gov­ern­ment to not only have a board po­si­tion in the re­struc­tured en­tity but would also en­joy full vot­ing rights.

“With the is­sue more or less re­solved, NTPC can go ahead and ac­quire en­tire Cen­tre’s eq­uity in SJVNL. If Hi­machal Pradesh gov­ern­ment also de­cides to sell its eq­uity, the power ma­jor could pick up that as well,” said a gov­ern­ment of­fi­cial ask­ing not to be named.

To­gether with Hi­machal’s share in SJVNL, NTPC may have to fork out close to Rs 10,800 crore.

Con­firm­ing the de­vel­op­ment top gov­ern­ment sources said that though the idea of this merger is to ex­pand the non-fos­sil fuel power gen­er­a­tion NTPC, it would be used as a first step to bring about con­sol­i­da­tion in the sec­tor. This could be done by cre­at­ing a large pub­lic sec­tor power be­he­moth, in­te­grated ver­ti­cally, with pres­ence in min­ing, gen­er­a­tion (both con­ven­tional and re­new­ables) and even trans­mis­sion at a later stage.

The merger will help NTPC build upon its hy­dro po­ten­tial that has seen very slow progress so far. Out of its to­tal in­stalled ca­pac­ity of about 53,651 MW, NTPC has a mere 800 MW of com­mis­sioned hy­dro gen­er­a­tion.

SJVNL’s ac­qui­si­tion will im­me­di­ately add 1,965 MW hy­dropower gen­er­a­tion through three plants to NTPC’s port­fo­lio. It also helps the gen­er­a­tor fur­ther in­crease its gen­er­a­tion by 8.7 bil­lion units.

Of­fi­cials from NTPC de­clined to com­ment on the news but com­pany sources con­firmed for­ward move­ment on the merger plan. The de­vel­op­ment has also helped SJVNL shares to gain 0.17 per cent on BSE to close at Rs 30.30 a share. NTPC shares lost 1.22 per cent to close at Rs 158.35 apiece. The de­vel­op­ment comes at a time when NTPC ten­der to take over hy­dropower projects did not elicit any re­sponse from project de­vel­op­ers. Though the com­pany in­tends to ex­plore ten­der route once again, SJVNL deal could slow the process.

Sources said while the first phase of con­sol­i­da­tion may in­volve NTPC buy­ing out SJVNL from the gov­ern­ment, in the sec­ond phase it could look at the pos­si­bil­ity of bring­ing the coun­try's trans­mis­sion as­sets cur­rently with Power Grid un­der its fold. Si­mul­ta­ne­ously, other sta­te­owned as­sets in re­new­able could also be brought un­der NTPC um­brella. NTPC it­self has a huge pro­gramme to add close to 15,000 MW of so­lar ca­pac­ity to its port­fo­lio.

Mak­ing NTPC as the power be­he­moth may not be a soli­tary ex­am­ple of the pol­icy push given by the Modi gov­ern­ment. Al­ready, gov­ern­ment has merged HPCL with ONGC and look­ing at more oil PSUs for merg­ers.

The gov­ern­ment has also be­gun the process of con­sol­i­da­tion in the bank­ing sec­tor by ap­prov­ing merger of five sub­sidiaries of State Bank of In­dia with the par­ent. Also it is ex­plor­ing merger of three gen­eral in­sur­ance com­pa­nies to cre­ate a large en­tity be­fore it is listed.

Cre­ation of large in­te­grated en­ter­prises in dif­fer­ent sec­tors is be­ing con­sid­ered to pro­vide depth to prof­itable CPSEs so that they could fig­ure among top com­pa­nies glob­ally. Adding scale also help com­pa­nies to play a dom­i­nant po­si­tion in global mar­kets and get bet­ter bar­gains on ac­qui­si­tions of as­sets and other re­sources.

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