New Delhi: Dollar debt costs for NTPC Ltd have dropped to a one-year low on optimism that the world’s worst blackout will be a catalyst for government measures that support the nation’s largest electricity producer.
The yield on the state-owned company’s 5.875% bonds due March 2016 slid 49 basis points (bps) since June to 3.60% on 10 August, Standard Chartered Plc prices show. That for Asian utility debt fell 35 bps this quarter, according to Credit Suisse Group AG data, as optimism that Europe’s debt crisis will be contained bolstered demand for riskier assets. The New Delhi-based firm, which said it wasn’t to blame for the power failure, sold 10-year rupee debt at 9.44% in May.
One basis point is one-hundredth of a percentage point.
NTPC said this month it will return to the international bond market after an absence of more than a year to raise $1 billion, seeking to fund a 30% increase in output by 2017. Power minister M. Veerappa Moily said on 6 August the government will take faster action to boost generation and upgrade transmission networks after a grid collapse left more than 640 million people without electricity across the north and east of India.
“The power outage may actually aid the issuance, since it reinforces the fact that power demand is higher than supply and there is a great chance for NTPC to expand,” Hemant Dharnidharka, head of credit research at SJS Markets Ltd in Bangalore, said in a 14 August interview. “That, along with the security of government support, is a good enough reason to invest.”
State-owned Power Finance Corp. Ltd, India’s largest lender to electricity utilities, will file documents for a $1 billion medium-term note programme by the end of this month, chairman Satnam Singh said on 8 August. Rural Electrification Corp. Ltd, another state lender to power projects, received approval from the central bank to sell $750 million of bonds, finance director Hari Das Khunteta said on 27 July, four days before retiring.
The extra yield on NTPC’s 2016 notes over similar-dated Treasuries fell to a nine-month low of 294 bps on 7 August, a day after Moily said India had appointed a panel of officials to draw up an immediate plan to improve the nation’s electricity infrastructure.
NTPC, which generates 19% of India’s electricity, is seeking to expand its generation capacity to 51,052 MW by March 2017 from 39,174 MW, Chairman Arup Roy Choudhury said in New Delhi on 7 August. About 70% of the required investments will be funded through debt, he said. Bloomberg