NTPC seeks coal-based power assets

The company has asked interested parties to offer their power plants, whether operational, commissioned, synchronised, under construction or under planning stages

NTPC issued an expression of interest (EoI) on Thursday, seeking to buy coal-based power plants, whether operational, commissioned, synchronised, under construction or under planning stages. The state-owned power generator wishes to use its huge cash pile to consolidate its presence as the country’s largest in the sector. In a sector that has been grappling with a slowdown, the move is expected to revive the merger & acquisition (M&A) activity.

State electricity boards (SEBs), independent power producers, power plant developers and captive power producers have been asked to offer projects based on domestic coal, imported coal or a mix of both. EoIs will have to submitted by April 7. Analysts said time was ripe for NTPC to make acquisitions as valuations were low. Besides, the company is among a handful of Indian firms with the balance sheet strength to pull off such deals. It had a cash reserve of Rs 16,867 crore as on March 31, 2013.

READYING SHOPPING LIST

• NTPC floats global expression of interest for acquiring coal-based power assets
• Move could trigger revival of M&A activity amid lower valuations in a sector grappling with a slowdown
• Company says will buy projects with firm linkages, clearances and PPAs in place — whether in India or abroad
• Assets could be at planning or construction stages, or already commissioned
• Projects might be based on domestic coal, imported coal or a mix of both
• Last date for submission of expression of interest: April 7

"This is appropriate time for acquisitions. A number of developers have realised that the high returns originally envisaged are not possible; they are willing to exit," said Salil Garg, director (corporate affairs), India Ratings and Research. Garg said no major acquisitions had occurred in the sector over the past year. He, however, cautioned that most projects likely to be sold had issues like regulatory hurdles.

Apart from the EoI, a sub-committee of NTPC board was also looking at a few proposals for acquisition, chairman & managing director, Arup Roy Choudhury, had said earlier this month. NTPC, which owns and operates 22 power plants, has a generation capacity of 42,400 Mw. around a fifth of India's total installed capacity. It had earlier evaluated at least six projects, including Larsen & Toubro's (L&T's) Rajpura project in Punjab and all thermal power projects of the debt-laden Jaypee group, beside Shapoorji Pallonji’s imported coal-based plant in Gujarat and state government’s projects in Bihar & UP.