NTPC, which is in the process of acquiring the central government’s stake in two hydro power firms, THDC and NEEPCO, is likely to depend on external funding to do so, not internal cash flow.
The thermal behemoth’s cash and equivalents has reduced by 80 per cent in the past four years and its debt risen by 58 per cent in this period. Company executives said they would evaluate several funding streams, including the bond market.
In November, the Cabinet Committee on Economic Affairs approved strategic disinvestment of the Centre’s entire stake in THDC India and NEEPCO. It was also decided to sell the stake to another public sector undertaking. The department of investment and public asset management is still hiring transaction and legal valuers for the deal.
Internal estimates suggest NTPC’s acquisition of the Centre’s stake in two companies could be worth around Rs 8,000 crore. Senior officials at NTPC, however, want more clarity on purchasing the stake in THDC, as the government of Uttarakhand has protested against the central decision.
THDC operates 2,400 Mw of hydro power projects, including the Tehri Dam project, and is headquartered in Uttarakhand. The company is a joint venture of the government of Uttar Pradesh (at the time these projects were set in motion, Uttarakhand was part of UP) and the Union of India.
“We have no communication from the Centre yet about THDC being handed over to NTPC,” Uttarakhand's parliamentary affairs minister, Madan Kaushik, said last week in the legislative assembly. “THDC is the country's pride. Ever since Uttarakhand came into being, we have been working for the transfer of the 25 per cent of Uttar Pradesh's stake in the company to Uttarakhand, besides making our claim on 12 per cent of the electricity generated by the firm for free.”
NTPC's acquisition of THDC and NEEPCO fits well with its plan to blend all energy sources and sell at optimum rates. By adding 1,457 Mw of NEEPCO, the company will expand its presence in the northeast region. THDC's units are in the proximity of half a dozen thermal units of NTPC in the northern region.
Company executives said a financial plan for this acquisition is yet to be drafted. “Let the finance ministry clarify and give a go-ahead. We will then take a call on the funding stream,” said an executive.
The bond market is priority, he added. NTPC had entered this market in July this year, to raise long-term debt for its capital expenditure and general corporate requirements. The issue's base size was Rs 500 crore, with an over-allotment option, to retain oversubscription up to Rs 4,000 crore and a tenure of 10 years. It received bids of Rs 9,359.9 crore and NTPC decided to retain Rs 4,300 crore, at an annual coupon of 7.32 per cent. This was its largest private placement of bonds till date. These will be listed on both major stock exchanges, NSE and BSE.