Power bourses eye funds, tech

Power trading exchanges on Friday got a major boost with the government allowing 49 per cent foreign investment — 26 per cent via foreign direct investments (FDI) and the rest via foreign institutional investors (FIIs).

The decision, taken by the Cabinet Committee on Economic Affairs, allowed FII through the automatic route and FDI through the foreign investment promotion board.

FII purchases are, however, restricted to the secondary market and a no single entity is allowed to hold more than five per cent stake.

Currently, there is no specific dispensation under FDI policy for power trading exchanges. Indian Energy Exchange (IEX) and Power Exchange India (PXI) are operational and they are trading about two per cent of the 800 billion units generated in the country. These exchanges are engaged in day-ahead market and await regulatory approvals for future and derivative products. IEX’s daily turnover is 65 million units while PXI handles 1 to 3 million units of transaction a day. Two power exchanges — National Power Exchange and Marquis Energy Exchange — are being planned.

Jayant Deo, who stepped down on August 31 as MD & CEO of Indian Energy Exchange , said the Cabinet decision was a welcome one. “The collective knowledge of the world in power exchanges is very low and it has been in India hardly for four years.”

The foreign investment will give knowledge sharing a big boost.” IEX’s stakeholders include Financial Technologies, PTC India, Rural Electrification Corporation, IDFC.

Rupda Devi Singh, MD & CEO of Power Exchange India, called the decision a huge positive. “Any new regulations bring clarity, which always helps. Foreign investment in power exchanges will not only help bring in more funds, but technological knowledge also.”

PXI’s equity holders include NSE, NCDEX, PFC, Governments of Gujarat and Madhya Pradesh and West Bengal, JSW, GMR and Tata Power Trading.

M G Raoot, MD & CEO, National Power Exchange: “This is a welcome decision for the growth of the power market on the exchange platform. India has already adopted a multi-exchange model, thereby giving space for foreign investors to step into this new area with high potential. The power exchanges, which are capital intensive ventures, will benefit due to foreign investment.”

The equity holders of National Power Exchange, which is yet to begin operations, are NTPC, NHPC and PFC (collectively 50 per cent) and TCS. BSE, Meenakshi Power, IFCI and DPSC, West Bengal.

R V Shahi, former power secretary, said: “It is a good decision as every ingredient of power sector, namely generation, transmission, distribution and trading, were already allowed to get foreign investment in the past. It is logical to extend it to power exchanges which are doing an extremely good job.”