NTPC likely to acquire govt's stake in THDC, Neepco for Rs 8,000 cr

Govt hopes non-tax revenue items, divestment can help it make up for some of tax shortfall in a slowing economy

Power major NTPC is likely to acquire the central government’s stake in two unlisted state-owned power companies — THDC and Neepco, Business Standard has learnt. 

While the Centre is in the process of appointing transaction and legal advisors and asset valuers for the ‘strategic sale’ of the two companies, internal calculations show that both the deals could fetch the exchequer around Rs 8,000 crore.

The Centre holds a 100 per cent stake in Neepco, which operates and maintains power stations in the Northeast region, and 75 per cent in THDC. The remaining stake in the company is held by the Uttar Pradesh government. Only the Centre’s stake is being sold in THDC. 

The Department of Investment and Public Asset Management faces its highest divestment target of Rs 1.05 trillion for 2019-20. With the slowdown impacting tax revenues, the government hopes that non-tax revenue items like dividends and telecom revenues, and divestment can help it make up for some of the tax shortfall. In its request for proposals to hire advisors, the Centre has made it clear that both TDHC and Neepco are meant for sale to another public sector undertaking (PSU) under the Power Ministry. That PSU will be NTPC, subject to approval by the Union Cabinet, confirmed a senior official. Work on the contours of the two acquisitions has begun and the deals are expected to be announced in the next few months. 

“TDHC and Neepco are the only two PSUs being earmarked for sale to another PSU this year. For all other strategic sale candidates like Bharat Petroleum, Air India, Shipping Corp, and Container Corp, it has been made clear in the topmost levels of the government that they will be sold to private investors. NTPC is the front runner to acquire the two companies,” the official said. 

NTPC’s acquisition of THDC and Neepco fits well with its plan to blend all energy sources and sell at optimum rate. By adding 1,457 megawatt (Mw) of Neepco, the company will expand its footprint in the Northeast region. THDC, which operates 2,400 Mw of hydropower project, including Tehri Dam, is in proximity to half a dozen thermal units of NTPC in the Northern region. 

India’s largest power generator, which has more than 50,000 Mw of coal-based power generation capacity, is looking at increasing its share of clean energy sources. It earlier tried to buy Centre’s stake in Sutluj Jal Vidyut Nigam, but Himachal Pradesh refused for stake sale. 

NTPC also plans 20,000 Mw of renewable power generation, for which it is setting up solar and wind power plants. To maintain grid balance, company executives said, NTPC was looking at hydro to balance coal and intermittent renewable energy. “As part of strategy, NTPC plans to blend energy sources at its own end and offer power at average rate, which will be cheaper for states that procure through long-term agreement,” said a company executive.

At the same time, Plant Load Factor of coal power plants is falling with rising share of renewable energy. Executives said shift towards clean energy sources would maintain steady revenue flow for NTPC.

STRATEGIC SALE

• THDC, Neepco marked for PSU-to-PSU sale
• The Centre holds 100% in Neepco, which operates and maintains power stations in the Northeast region
• While the government has 75% stake in THDC, the remaining is held by Uttar Pradesh government. 
• Only the Centre’s stake is being sold in THDC 
• Officials say acquisitions fit well with NTPC’s long-term plans
• The firm looks to acquire other energy sources, including clean energy