New Delhi: In an effort to acquire expertise it doesn’t currently possess, India’s largest power generation company NTPC Ltd is in talks with foreign firms in the renewable energy business to sell around 40% of its stake in a proposed joint venture (JV) with multilateral lending agency, Asian Development Bank (ADB).
NTPC will hold 40%, ADB, 20%, and the foreign companies will hold 40% in the venture that is part of an effort by the company and the government to reduce, if only marginally, the dependance of the country on fossil fuels such as coal and gas for power generation. The foreign companies are expected to share their expertise in the areas of wind, solar, geothermal and biomass energy generation.
In talks: NTPC chairman and managing director T. Sankaralingam. The firm will shortlist two foreign companies for the joint venture
“We are in talks with four overseas firms. We will be shortlisting two, who will then pick up 20% equity stake each. The decision on final selection will be taken shortly,” said a senior NTPC executive familiar with the development who did not wish to be identified. He declined to name the overseas firms citing commercial considerations.
The funding for the JV hasn’t been finalized.
NTPC’s willingness to form alliances with such companies “indicates that companies want to diversify to newer fuels for generating power as coal and crude oil prices are on a rise”, said Hitul Gutka, an analyst at Mumbai-based India Infoline Ltd.
According to the government’s integrated energy policy, renewable energy can be used for heating, cooling, water pumping, cooking and for almost any end-use that is currently met by fossil fuels.
“This tie-up makes sense as the national tariff policy has fixed a 5% procurement criteria from renewable sources within five years,” Shubhranshu Patnaik, an executive director at audit and consulting firm PricewaterhouseCoopers, had earlier said.
Some state electricity regulatory commissions, such as those in Gujarat and Maharashtra, have already fixed the amount of energy which needs to be procured from renewable energy sources.
The new firm aims to secure finances to meet the relatively high capital costs needed to generate non-conventional energy, such as wind power. NTPC’s board has already given its in principle approval to the JV as reported by Mint on 6 February.