New Delhi: Following the collapse of a plan to create an exchange for trading electricity promoted by rival National Commodity and Derivatives Exchange Ltd, the Multi Commodity Exchange of India has begun to woo NTPC Ltd, India’s largest power generation company, to be part of its own Indian Energy Exchange, or IEX.
In order to win over NTPC, Financial Technologies (India) Ltd, the holding company of MCX, is said to be willing to dilute its 44% holding in IEX.
PTC India, the country’s leading power trading company, holds 26% stake in the soon-to-be launched power exchange. Power utilities such as Tata Power Co. Ltd, Lanco Infratech Ltd, Adani Power Ltd and Reliance Energy Ltd hold 5% each. Rural Electrification Corp. and Infrastructure Development Finance Co. also hold 5% each.
“If NTPC and MCX come to an agreement, FTIL will dilute its own stake (in IEX) to accommodate NTPC,” said an executive close to the development who didn’t want to be identified.
“There is no headroom left in the present arrangement. If NTPC wants to join this exchange, then FTIL will have to reduce its stake,” a senior PTC executive, who did not wish to be identified, said.
Both NTPC and MCX spokespersons declined to comment.
NTPC chairman and managing director T. Sankaralingam. (Madhu Kapparath / Mint)
Analysts believe NTPC’s joining the power trading exchange will be significant, given the fact that it has a power generation capacity of 27,404MW and plans to increase this to 50,000MW by 2012.
Plans to set up a second exchange to trade electricity and involving the NCDEX came unstuck following irreconcilable differences among the initial group of promoters as reported by Mint on 15 February.
A power exchange functions on the lines of commodity exchanges and provides a platform for buyers, sellers and traders of electricity to enter into spot and forward contracts. The exchange primarily identifies the price for the following day, which is the electricity sector’s equivalent for the spot price. It would also provide a payment security mechanism to buyers and sellers.
Power sector analysts, however, see a potential conflict between NTPC and PTC if both of them partner in IEX, because both are present in power trading business. NTPC’s power trading business is operated through its subsidiary NTPC Vyapar Vidyut Nigam Ltd.
“There may be a conflict between the two, if NTPC gets a substantial stake and they have some kind of management control,” predicts Kuljit Singh, a partner at accounting firm Ernst and Young.