Hydropower Goliath idea has Davids protesting

The idea of a mega entity to control all Union government-run hydro power companies is likely to mean a body with a market capitalisation of Rs 51,000 crore and a government stake up to 81 per cent.

The ambitious report prepared by SBI Caps at the behest of National Hydroelectric Power Corporation (NHPC), has caught the ire of many, with no one taking responsibility for the idea. The concept paper is only a compilation of the profiles of government-owned hydro power companies. It mentions no schedule for the merger of NHPC with smaller companies such as SJVN, Tehri Hydro Development Corporation (THDC) and North Eastern Electric Power Corporation (Neepco). SJVN and THDC have state government equity; of the three, SJVN is the only listed company.

"The government investment is currently illiquid in Neepco and has no financial standing of its own. The financial health of THDC is such that it will not garner a lot of investor interest," said the report by SBI Caps. In such a case, it said, it would be beneficial to merge the entities and the best practices in the sector. It said NHPC should look at acquiring Neepco first, then THDC and finally, SJVNL, where there was considerable share of the respective state government. How and on what terms wasn't stated.

The 10-page report has forecast a profit after tax of Rs 2,931 crore annually for the merged organisation. The incomplete report has already drawn resistance from the smaller companies.

They said they weren't consulted. In its letter to the ministry of power, SJVNL protested it was not kept in the know of the preparation of the report. "The concept paper on 'integration of central hydro PSUs in India, as prepared by SBI Caps was not discussed by NHPC with any of the CMDs (chairman) before submitting to the ministry of power. Further, certain facts have not been truly and appropriately reflected in this report," said the letter.

A NHPC executive said the copy was given only 15 days to prepare the report. Hence, the other companies were called for discussion before the concept paper was prepared but due to paucity of time, it could not be shared with them.

POWER PACKED PERFORMANCE

North Eastern Electric Power Corporation (Neepco):

• Installed capacity of 1,130 Mw— 47% of the total installed capacity of the North-East Region.
• Authorised share capital: Rs 5000 crore
• Net worth as on March 31, 2013: Rs 5004.70 crore

THDC (Tehri Hydro Development Corporation)

• Joint venture of Centre and govt of Uttar Pradesh with an equity share ratio of 75:25
• Was set up to operate 2,400 Mw of Tehri Hydro Power Complex and other hydro projects
• At present, has 16 projects of installed capacity of 8,796 MW under various stages of implementation.
• Paid-up share capital: Rs 3,443 crore

SJVN

• Joint venture of Centre and government of Himachal Pradesh holding total 89.9% of the company
• Total installed capacity: 1,500 Mw
• Total paid-up share capital: Rs 4,136 crore

The protest letter said any likely merger would lead to delay in implementation of projects, high cost, and ultimately, higher rates for power supplied. THDC has a foreign loan agreement worth $648 million, which will prevent it from carrying out any change in the shareholding pattern.

The government, however, said it was only an experimental concept. "This idea came up in the discussion with all public sector companies. So, we asked NHPC to prepare a concept note to let us see if that is possible or not. We are looking at fresh ideas for the sector and this is one of them," said, Piyush Goyal, minister for coal, power and renewable energy, on the sidelines of a government meeting last Friday.

Power ministry officials said there was no instruction on this idea. Rather, a senior official said it was originally an NHPC idea, which it was pushing before the government.

Said a Delhi-based expert: "NHPC is not able to operate its own projects; how could one expect to run around 60,000 Mw of hydro assets? SJVNL and Neepco are doing far better than NHPC is their respective areas. These companies now have domain expertise and they should be independent to do that."