NLC shortlists GMR, Ind-Barath power projects for acquisition
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New Delhi: In deals potentially valued at around Rs12,000 crore, state-owned NLC India Ltd has shortlisted for acquisition GMR Group’s 1,370 megawatt (MW) coal power project in Chhattisgarh and Hyderabad-based Ind-Barath Power Infra Ltd’s 700MW plant in Odisha.
NLC, earlier known as Neyveli Lignite Corp. Ltd, will shortly hire two consultants—one each from the public and private sectors to carry out the due diligence, said Sarat Acharya, chairman and managing director, NLC India on the sidelines of Global Natural Resources Conclave organized by Network18 and the Confederation of Indian Industry.
The public sector unit plans to acquire 3,000MW of stressed power generation capacity, driven by its strategy of using the revenue generated from running such projects to finance capital expenditure.
“Others had come as part of the process that we have been running for stressed power projects acquisition. We are also setting up a power generation capacity of 7,000MW, which will take around six years for commissioning. Acquiring such stressed projects will allow us to generate electricity and start cash flows,” Acharya added.
Mint reported on 6 January about NLC being in talks with Ind-Barath to acquire its coal-fired power plant in Odisha.
On 23 August, NLC India invited expressions of interest from firms owning coal- and lignite-based power plants of capacity of more than 2,00MW for possible acquisition.
Across the country, thermal power projects totalling around 25,000MW are up for sale. Over the last few years, power companies have found it difficult to secure fuel supplies and buyers for the power they generate because debt-laden state electricity boards are unwilling to buy expensive power. Most power generators are weighed down by debt, forcing some of them to sell assets.
NLC has already signed an agreement to acquire Damodar Valley Corp.’s (DVC) 1,200MW Raghunathpur project in West Bengal through a joint venture company (JVC) proposed to be formed with DVC, with an equity shareholding of 74:26 by NLC and DVC. However, the acquisition plans have been hanging fire due to opposition from the West Bengal government.
While the Raghunathpur projects has got other clearances, we are still awaiting clearance from the West Bengal government, which has been stuck for six months, Acharya said.
DVC, formed on the lines of the Tennessee Valley Authority in the US, is owned by the Union government and the state governments of West Bengal and Jharkhand.
Experts believe consolidation is inevitable because power projects are stressed.
“It is exciting to see power producers evaluating distressed assets and bringing forward their plans for capacity addition if the deal is priced right. It aligns to their competitive advantages like understanding of the region, availability of fuel source and capital, operational excellence and long-term sale of power. It also releases financial stress in the sector,” said Sambitosh Mohapatra, partner (energy) at PwC India.
While a GMR spokesperson did not respond to queries emailed on Thursday evening, an Ind-Barath spokesperson confirmed the development and in a text message said, “Yes, NLC has shortlisted our Odisha plant and discussions are currently ongoing between the parties.”
NLC India which has an installed power generation capacity of 4,301MW, also plans to set up 4,000MW of solar power projects and is in talks with states in order to draw up viable power purchase agreements for selling electricity to them.
“We are developing a 630MW solar power plant in Tamil Nadu...We have a capital expenditure plan of Rs1,24,000 crore (Rs1.24 trillion) to meet our 2025 target. We are also looking at developing lithium ion batteries which is under consideration of our research wing,” Acharya said.
A host of state-owned firms such as Power Grid Corp. of India Ltd, NTPC Ltd and Bharat Heavy Electricals Ltd are chalking out clean energy strategies, encouraged by the opportunities offered by India’s solar power ambitions. India plans to generate 175GW of renewable energy capacity by 2022. Of this, 100GW is to come from solar power projects with storage being seen as the next frontier in India’s clean energy push.