State-owned National Hydroelectric Power Corp. Ltd or NHPC and Jindal Steel and Power Ltd or JSPL may form a joint venture to set up power projects, making the first public-private partnership in India’s hydropower sector.
“JSPL has written to us to form a joint venture that will set up projects. A public-private partnership is yet to happen in the Indian hydropower sector. We are evaluating the proposal,” an NHPC executive who did not wish to be identified said.
The rationale behind the arrangement is that while the technical expertise will be provided by NHPC, the private sector company will bring in the money. “Though we have been present in the thermal power sector, for us hydro is a new area. NHPC knows the drill and a joint arrangement will work in our favour,” R.K. Saraf, head of power group at JSPL, said.
A Jindal Stainless Ltd plant in Hisar. The Jindal group has experience in thermal power, but is now looking at hydropower too (Photo by: Rajeev Dabral)
JSPL is setting up a coal-based 1,000MW project in Chhattisgarh. Though the company lost out on the Sasan ultra mega power project when its partner was disqualified, it has been active in bidding for other thermal power projects.
It takes around five years to execute a hydropower project after it is cleared for construction. Hydropower projects are more complex to build, and need specialized technology and design compared with thermal power projects.
A Delhi-based analyst, who did not wish to be identified citing commercial considerations, said: “Though such an arrangement looks very good in principle, the problems start at the time of implementation.” For the private company, getting NHPC on board will be a positive as the state-owned company is present in all the regions and has better corporate social responsibility practices, the analyst said.
“Even land acquisition becomes easier for a public sector unit. Since the internal resources of NHPC are quite thin and project financing are a challenge, this will bring money and scale to it,” the analyst added.
NHPC ended 2006-07 with a net profit of Rs925 crore on revenues of Rs1,963 crore.
India has a hydropower generation capacity of 32,000MW and plans to add another 16,553MW capacity by 2012. Even as 35%, or 5,800MW, of this target is expected to be added by NHPC, 12 of its projects have already been delayed due to shortage of manpower and price disputes with private contractors.
NHPC has been affected by an exodus of employees, largely engineers, to private sector power firms such as the Reliance Reliance-Anil Dhirubhai Ambani Group’s Reliance Energy Ltd, Lanco Infratech Ltd and DS Constructions Ltd, as reported by Mint on 28 August.
Several hydro projects have been delayed and India has met a little less than half the target of 14,393MW set for hydropower generation in the 10th Plan. In April, a study by the parliamentary standing committee on energy showed the increase in project costs due to delays varied from 400% to 2,500%.
NHPC also needs money for the projects it has in the pipeline and is hoping that its initial public offering, or IPO, will be cleared soon so that it can tap the capital markets by August. NHPC plans fresh sales of shares amounting to around 10% of its authorised share capital of Rs15,000 crore. The government, which currently holds 100% equity in it, will sell 5% of its holding to the public. After the IPO, the government’s stake in NHPC will come down to 86.30%.