NHPC proposes to exit from National Power Exchange

NHPC (formerly National Hydro Electric Power Corporation) has proposed to exit from the National Power exchange (NPX) in view of the change in market conditions. NHPC’s move comes on the heels of another promoter, NTPC, deciding to exit from the NPX.

Now it is up to other promoters such as Power Finance Corporation (PFC) and Tata Consultancy Services (TCS) to decide the fate of NPX, India’s third power exchange.

NTPC, NHPC and PFC hold 16.67 per cent each. The remaining 50 per cent by TCS, BSE, IFCI, Meenakshi Power and DPSC. These promoters had entered into a joint venture agreement on September 3, 2008 and the NPX was incorporated on December 11, 2008.

This month, NHPC wrote to other promoters: “NPX was incorporated in December 2008. As per the joint venture agreement and consequent to NTPC’s request to exit, the board of directors of NHPC decided to exit from NPX, as its objective to participate in the exchange was not achieved. The decision has been taken also due to changed market conditions.”

M G Raoot, managing director and CEO of NPX, said: “So far, NTPC and NHPC have requested to exit from the exchange. The decision now rests with PFC and TCS. There are three options - PFC and TCS can rope in new investors, explore NPX merger with other power exchange, or opt closure of the exchange.”

Raoot, who has been following the issue with all promoters, told Business Standard that NPX has approached the Central Electricity Regulatory Commission with a plea to grant six months’ time for taking a final position in the matter.

He added that the country needs a strong and vibrant power market and an institutional-based power exchange is needed for the growth of power sector.

According to him, Indian Energy Exchange (IEX) and Power Exchange India Limited (PXIL) are currently functioning with a “heavily skewed market”.

Currently, Financial Technologies-promoted IEX and PXIL, which is jointly promoted by the National Stock Exchange and National Commodity & Derivatives Exchange, are operational. IEX’s daily turnover is 60-65 million units, while it is 4-5 million units for PXIL.

Jayant Deo, managing director and CEO of IEX, said that NHPC withdrawing from NPX is normal. “This is due to non opening of power market. With 5 per cent cap on equity holding, they cannot have a direct say in NPX’s working, and thirdly, their core competence is in development and generation hydro projects.”