New Delhi: India’s biggest power generation utility NTPC Ltd may wind up one affiliate and exit a joint venture (JV) with European company Alstom SA as part of a restructuring exercise suggested by consultant Deloitte Touche Tohmatsu India Pvt. Ltd, people familiar with the situation said.
The state-owned company is considering closing NTPC Hydro Ltd (NHL) and leaving NTPC-Alstom Power Services Pvt. Ltd, as suggested in a draft report submitted by Deloitte.
In addition, the report recommended a timed exit by NTPC from equipment manufacturing joint ventures such as NTPC-Bhel Power Projects Pvt. Ltd, BF NTPC Energy Systems Ltd (BFNESL) and NTPC-Telk, a tie-up with Transformers and Electricals Kerala Ltd.
NTPC Singrauli Super Thermal Power Station at Shaktinagar in Sonbhadra District of Uttar Pradesh.(Mint)
“The draft report has been submitted by Deloitte. They have suggested closing down NHL and exiting some of our subsidiaries such as NTPC-Alstom Power Services,” said an NTPC executive, who requested anonymity.
The proposed restructuring has been prompted by NTPC’s desire to ensure that its management bandwidth and resources aren’t stretched too thin.
NTPC has 19 JVs and five subsidiaries in areas such as electricity distribution, services, energy efficiency, equipment manufacturing, power trading, power exchange and coal mining. The firm has also formed a new JV with the Asian Development Bank and Kyuden International Corp. to develop clean energy projects.
The power ministry has already approved NTPC’s proposed exit from International Coal Ventures Pvt. Ltd (ICVL), a company promoted over two years ago to buy coal mines overseas, but which hasn’t made a single acquisition so far. Steel Authority of India Ltd and Coal India Ltd own 28% each in ICVL. NTPC, Rashtriya Ispat Nigam Ltd and NMDC Ltd own 14% each.
“Apart from closing down NHL, which is NTPC’s subsidiary, an exit in some JVs has been suggested,” a person aware of the recommendations by Deloitte said on condition of anonymity. “Since there are issues around valuations, a timed exit in NTPC-Bhel Power Projects, BFNESL and NTPC-Telk have been recommended. No such recommendations have been made about the other subsidiaries.”
A second NTPC executive, also on condition of anonymity, confirmed that the Deloitte report suggested the closure of NHL and exit from NTPC-Alstom and other power equipment manufacturing JVs.
Mint reported on 5 October about NTPC’s proposed restructuring exercise that requires the power generator to review the future of its numerous JVs and subsidiaries.
While NHL was set up to develop small- and medium-sized hydropower projects, NTPC-Alstom, an equal JV between NTPC and Alstom Power Generation AG, was set up for renovation and modernization of power plants.
NTPC-Bhel Power Projects, an equal JV between NTPC and Bharat Heavy Electricals Ltd, was set up for the manufacture and supply of power project equipment and engineering, procurement and construction contracts.
BFNESL is a venture in which Bharat Forge Ltd holds a 51% stake, while NTPC holds the rest. The JV was set up for manufacturing castings, forgings, fittings and high-pressure piping and other plant equipment. NTPC also has a 44.6% stake in NTPC-Telk, set up for the manufacture and repair of transformers, with 54.56% held by the Kerala government company and the remaining 0.84% by the public.
Spokespersons for Deloitte, Alstom and Bhel declined to comment.
An NTPC spokesperson said in an email reply to queries: “NTPC has engaged Deloitte for review of JVs/subsidiaries and they have submitted a draft report. The same is under consideration of the management. However, no final view has been taken as yet.”
A Bharat Forge spokesperson, in an email, said his company was unaware of the development as “this may be an internal study of NTPC”.
The JV has already approved setting up manufacturing facilities on a 100-acre plot of land at Solapur in Maharashtra, the spokesperson said.
“The land has already been purchased and civil works for the facilities are slated to begin in the next few weeks based on specifications worked out by BFNESL’s technical consultant. Discussions are at an advanced stage with selected technology providers/JV partners for different products,” the spokesperson said.
“BFNESL expects to roll out its product line in 2012-13. This is in pursuance of requisite approvals within BFNESL as well as both its shareholders. The progress of various activities has been very positive and as per the expectation of the company and shareholders,” the spokesperson said.
NTPC is looking to increase installed power generation capacity from 34,854 megawatts (MW) to 75,000MW by 2017 and 128,000MW by 2032.