NTPC to buy assets of Chhabra power plant in Rajasthan

Rajasthan Rajya Vidyut Utpadan Nigam Ltd has been looking for buyers for three years

State-owned NTPC has signed a “non-binding” deal to buy the existing and upcoming assets of the Chhabra thermal power plant, owned and operated by the Rajasthan Rajya Vidyut Utpadan Nigam Ltd (RRVUNL), a Rajasthan government undertaking.

RRVUNL has been looking for buyers for three years. The memorandum of understanding (MoU) between NTPC and RRVUNL was signed on Wednesday and the former announced it on the exchanges on Thursday morning. While the cost of the plant is estimated at around Rs 15,000 crore, NTPC will currently pay around Rs 5,000 crore for the operational 1,000 Mw, according to sources.

The cost and power tariffs of the upcoming two units of 660 Mw each would be decided later, said NTPC executives.  This is the first deal of the year for both the conventional power sector and NTPC. NTPC will restrict itself to buying the power assets and not the coal blocks attached to the power plant.  The Parsa East and Kanta Basan coal blocks in Chhattisgarh were allocated to RRVUNL in the e-auction of coal mines in 2015. RRVUNL won the coal blocks by indicating that the Chhabra power plant was the end-user of those mines.

 The coal mines are operational and RRVUNL last year appointed Adani Mining as their Mining Development Operator (MDO).

“The coal blocks are not part of the deal but NTPC would source coal from these mines as RRVUNL would sell the coal,” a senior NTPC executive said.

NTPC was roped in after no private player agreed to buy the plant in accordance with the terms the state government had set, sources said. 

“The discussion with NTPC was on for some months and the deal culminated only recently. The move is in line with the organic growth of the company,” a senior executive said.

A non-binding MoU allows the parties in the deal to modify the terms later. The deal does not stand up in court. 

NTPC in its statement said: “The organisations shall execute Binding Agreements based on the detailed due diligence being underway.”

For allowing cost pass-through and tariff determination by the Central Electricity Regulatory Commission (CERC), NTPC will have to enter into a definitive agreement with RRVUNL.