Maharashtra mulls equity offer to NTPC in its genco

Formal move to offload equity after Cabinet decision and MahaGenco's credit rating analysis by CARE

The Maharashtra government plans to offer equity to NTPC Limited (formerly National Thermal Power Corporation) in its power generation company MahaGenco. A formal move to offload equity ranging between five per cent and 25 per cent will be taken after a Cabinet decision and a rating analysis done by CARE, and finalisation of financial restructuring plan by MahaGenco.

Maharashtra’s move comes close on the heels of Rajasthan’s offer to NTPC to take over its power plants. The government has ruled out the possibility of MahaGenco’s initial public offering at this juncture.

A state energy department official, requesting anonymity, told Business Standard, “The proposal to offload the government’s equity to NTPC is at a nascent stage. The equity offload will be in the range of five per cent and 25 per cent. MahaGenco has a total debt of Rs 22,000 crore. There is a twin objective to the proposed equity offload. One, to mobilise funds and thereby use proceeds by MahaGenco to partially retire high cost debt and finance the ongoing capacity expansion. Two, NTPC’s technical and managerial expertise will be instrumental in improving operations, efficiency, and take MahaGenco’s performance to a new high.”

He argued that NTPC with a total installed capacity of 45,048 Mw — (including joint ventures) with 18 coal-based and seven gas-based stations — has the wherewithal to pick up equity in MahaGenco.

When contacted, an NTPC spokesperson preferred not to comment.

The Maharashtra Electricity Regulatory Commission’s (MERC) former member Jayant Deo said, “The viability of MahaGenco plants,  even in the hands of an efficient NTPC, is doubtful without massive overhaul, technology, management and power purchase agreements (PPAs). Unless the state government gives a part of the distribution rights (besides management), NTPC may not agree to take equity in MahaGenco.”

MahaGenco, which was established by the state government under the Electricity Act, 2003, has a total generation capacity of 11,237 Mw comprising 7,980 Mw thermal, 2,585 Mw hydel, and 672 Mw gas turbine. The company, in its filing at MERC, has projected an aggregate revenue requirement of Rs 16,547.29 crore for 2015-16.  The power generation units have a normal plant load factor (PLF) of 81.123, and their annual coal requirement is estimated at 33.32 million tonne.

MahaGenco is implementing capacity additions programme of about 9,320 Mw. Project execution works of 3,230 Mw are in progress, and 6,090 Mw projects are in advanced stages of planning.
STRESSED ASSETS TAKEOVER

• NTPC in talks with Rajasthan, Madhya Pradesh and West Bengal for takeover of stressed assets
• NTPC open to taking over majority stakes in troubled power plants
• Maharashtra internally launches exercise to offer equity to NTPC in MahaGenco
• NTPC has total installed capacity of 45,048 Mw (including joint ventures)
• MahaGenco established by the state government under the Electricity Act, 2003, has a total generation capacity of 11,237 Mw