India’s largest power generation company NTPC Ltd is in active talks with more than one foreign power generation company for acquiring assets in excess of $1 billion (Rs3,960 crore).
Since most of these are integrated power companies, which source their own fuel for generation, the acquisition would also open up opportunities for NTPC to secure supplies of coal and gas for its domestic operations.
“We are looking for acquisitions in the neighbourhood and are in active talks for the same. We are also in talks for such acquisitions in other markets. We are looking for opportunities in those countries where the law of the land is good and conducive to foreign investments. It is a very important thing for us. Since these projects are commissioned ones, they will give us good returns,” said T. Sankaralingam, chairman and managing director, NTPC. He declined to comment on the size of the proposed acquisitions.
According to the company, securing coal and gas supplies is a key focus. Coal is critical for NTPC as more than 80% of its installed capacity of 27,404MW is coal-based. It has an overall demand of 115 million tonnes per annum (mtpa) of coal and imports 4mtpa of coal to meet its overall requirement.
Similarly, NTPC is desperately seeking supplies for its seven power plants fuelled by gas or liquid fuel with a total capacity of 3,955MW; and also the 740MW gas-based plant. They are all operating at lower levels of capacity utilization and efficiency because of unavailability of the fuel. According to company officials, who did not wish to be identified, the capacity utilization is 60-65%, while the global average for similar plants is 80-90%.
“Though these would be multibillion dollar deals, that is hardly an issue with NTPC. It is not revenue but synergy with their Indian operations that has made NTPC look overseas for such acquisitions,” says Shubhranshu Patnaik, an executive director at audit firm PricewaterhouseCoopers.
The company, which has cash reserves of around Rs12,000 crore, hasn’t yet succeeded in its quest for overseas power generating assets.
Its global aspirations suffered a setback with Globeleq rejecting its bid for a 683MW combined-cycle gas project in Egypt. Globeleq wanted the Indian firm to participate in the sale of its projects in Asia, Latin America and Africa, while NTPC was only interested in the Egyptian project.
NTPC was also interested in bidding for the ongoing sale of Temasek Holdings’ Tuas Power of Singapore, which has assets of 2,670MW, but could not do so because the Indian government was late in approving the request. “We could not bid as we came to know about the deal a bit late. Since the deal required us to commit more than Rs1,000 crore as equity we needed a nod from the cabinet committee on economic affairs, which we could not get in time,” a senior NTPC executive who did not wish to be identified said.
Tata Power Co. Ltd, Reliance Energy Ltd and GMR Infrastructure Ltd are companies from India which have bid for the $2 billion asset.