NSE pulls plug on power exchange ahead of IPO

In what could potentially disturb the power trading market in the country, National Stock Exchange (NSE), with the National Commodity and Derivatives Exchange (NCDEX) has voted to shut down their power trading platform, the Power Exchange of India (PXIL).

NSE-NCDEX collectively own 61 per cent stake in the power exchange. They said at an extraordinary general meeting (EGM) dated January 25, they’d decided to shut the “loss-making” bourse. Sources say there was strong dissent from stakeholders in the power sector. 

“We recently advised PXIL to consider taking immediate steps to close down its business as early as possible and in any event not later than February 28, since PXIL has been incurring heavy cash losses,” said NSE in the draft prospectus filed with the Securities and Exchange Board of India for its upcoming initial public offer of equity.

Persons close to the development said NSE put this statement to a vote during the EGM. “Other shareholders, all of which represent the power sector, voted against it. Tata Power Trading Company, with 5.16 per cent holding in PXIL, was not even present when voting took place,” said an executive.

Other shareholders are GMR Energy, Tata Power, JSW Energy, state-owned Power Finance Corporation, Gujarat Urja Vikas Nigam and West Bengal State Electricity Distribution Company.

An NSE spokesperson declined to comment. Sources in NSE said the decision was because of the losses at PXIL. “The business of PXIL is very limited and the market is not growing. NSE decided to come out of it. There are extraneous factors responsible,” said a source privy of the matter. 

PXIL’s losses widened to Rs 2.45 crore in 2015-16, from Rs 1.8 crore a year before. 

Under power sector regulations, approval from the Central Electricity Regulatory Commission (CERC) is also required for closing down an exchange. Section 36 of the latter’s Power Market Regulations state: “Power exchanges shall have their exit scheme approved by the Commission during the registration process, detailing the manner in which the running contracts on the exchange shall be closed or the succession plan for all transacted contracts in case of closure of a power exchange, cancellation or withdrawal of registration under these regulations.” NSE will be seeking CERC approval. 

India Energy Exchange is the only other power trading marketplace in the country. PXIL has only two per cent in the power trading market, with average daily traded volume of close to three million units. However, in the Renewable Energy Certificates market, its share had risen to 49 per cent in 2015-16, from 23 per cent a year before.

Source: NSE IPO prospectus