New Delhi: The Indian power sector is looking to tap rich West Asian countries for $6 billion (Rs26,460 crore) in funds. This amount is almost a tenth of the capital requirements for the country’s new power projects in the next five years.
The initial focus is to attract investments from Saudi Arabia, Qatar, the United Arab Emirates and Kuwait.
The Centre’s strategy is to canalise funds into power projects through public sector undertakings (PSUs) such as nation’s No.1 power producer NTPC Ltd, hydel power major National Hydroelectric Power Corporation (NHPC), and transmission major Power Grid Corporation of India Ltd. “NTPC, NHPC and PowerGrid have been given an investment target of around $2 billion (Rs8,600 crore) each,” a power ministry official said.
The first investment will be made by the Qatar Investment Board (QIB), by taking a 40% equity stake in NTPC’s 350 MW Kayamkulam combined cycle gas project, which is slated for expansion to 1,950 MW. The expansion project involves a total investment of Rs6,000 crore. “The QIB will be a equity partner in the project. However at present an assured supply of liquefied natural gas (LNG) from Qatar for the project is not part of the deal,”the power ministry official said.
The government has plans for Bahrain and Oman also. Buoyed by high petroleum prices, the oil-rich West Asian economies have large cash surpluses. Reluctant to park their money in United States government bonds, they are looking for alternative commercial investment opportunities.
While attempts are being made to attract equity investments in a joint venture form, the West Asian investing agencies may not take controlling stakes in the projects. The West Asian countries have expressed interest in putting up both equity and debt for the projects.
The five projects that have been short listed for initial investment are the Kayamkulam project, Ennore joint venture (JV) thermal project, Cheyuur JV project (all NTPC projects), NHPC’s Dibang project and a PowerGrid project. The investments will help the PSUs meet the capital requirements for adding 68,800 megawatt (MW) capacity in the next Five Year Plan ending 2012.
“We are confident about attracting investment to thehydel sector, and Dibang is only the first of the projects to be short listed. If the need arises, other projects will also be considered for the investments from the West Asian countries,” S.K. Garg, chairman and managing director, NHPC said.
The selected projects would be spun off as separate special purpose vehicles to facilitate investment. “We will be taking debt only if the interest rates are lower,” a Power Grid executive said. The government is of the view that the power sector should be able to attract equity investment up to 49% of the project funding, as the same is attractive due to 14% post-tax return on equity. The capacity of the power projects can also be increased, if needed, to accommodate additional investment.