NTPC sends team to China over equipment issues3 min read . Updated: 19 May 2015, 01:32 AM IST
Team visits Chinese facilities as part of due diligence exercise to assuage concerns over Chinese equipment
New Delhi: As part of its plans to acquire stranded assets in India, the state-owned NTPC Ltd has sent a team to China to evaluate the power-generation equipment supplied by the manufacturers there to Indian developers.
The high-level team including two directors from India’s largest power producer visited Chinese facilities as part of its due diligence exercise to assuage concerns over Chinese equipment, given the strategic importance of such power projects.
With NTPC expressing its reservations about the investment cost per megawatt quoted by some of the developers, the attempt was also to find out whether the equipment quoted by the developers is the same as that supplied by the Chinese manufacturers.
“A high-level team went to China to look at the Chinese power-generation equipment manufacturers facility. We want to be sure about what we plan to acquire," said an NTPC executive, requesting anonymity.
Another NTPC executive, who also didn’t wish to be identified, confirmed the development and said, “The idea was to ascertain the quality of Chinese equipment and also to find out whether the equipment quoted by the developers is the same as that supplied by the Chinese manufacturers. The due diligence is on."
While several Indian power project developers have placed orders with Chinese firms, some power plants that have used Chinese equipment have earlier run into trouble.
NTPC had earlier been planning to acquire 8,000-9,000MW of capacity and created a committee under the board’s supervision to evaluate the potential opportunities. It later scaled down its targets. The utility received 34 proposals for a total of 55,000MW in response to the expression of interest (EoI) it floated early last year for acquiring generation capacity from other power producers.
In addition, it has also received around 12 proposals in response to a second EoI floated in December. NTPC has earmarked ₹ 10,000 crore for funding the inorganic growth.
“We are in the last mile on several assets," said the first NTPC executive quoted above.
Slowing economic growth, high borrowing costs and delays in securing regulatory approvals had hit many infrastructure projects in India, including power plants, hurting the ability of their promoters to repay creditors and vendors. The situation is expected to improve as economic growth speeds up in the coming years.
Mint reported on 30 January about NTPC shortlisting two plants, one owned by Gautam Thapar’s Avantha Group and another by Adhunik Group, for potential acquisitions as it seeks to add capacity to meet future demand for electricity—a rare instance of a state-run entity purchasing domestic private-sector assets. The projects are Avantha Power and Infrastructure Ltd’s 600MW Jhabua Power Ltd in Madhya Pradesh and Adhunik Thermal Energy Ltd’s 540MW Jamshedpur project in Jharkhand.
The Central Electricity Authority (CEA), India’s apex power sector planning body, has been evaluating the performances of power-generation equipment in the country supplied by Chinese firms. An earlier audit found several problems with such machinery but stopped short of preventing power plants from using them. The report had raised questions about the operation and maintenance of the equipment, the lack of a comprehensive quality plan and the insufficient number of Chinese engineers at site locations.
There have been instances in the past when India stopped giving clearances to telecom equipment imported from China after security concerns were raised by the ministry of home affairs and the prime minister’s office. India also imposed import duty on power generation equipment in 2012 that will affect Chinese manufacturers.
With an installed capacity of 44,598MW, NTPC has a 17% share of India’s power generation capacity of 267,637MW and has set itself a target of becoming a 128,000MW power producer by 2032.
“We sense a bit of a pick-up in progress towards getting underconstruction projects on-stream (we expect commercial start-up of 10.1GW capacity in the next three years, i.e. FY16F-18F), comfort in linkage coal availability and expediting the steps to resume development of its captive coal blocks," Nomura Global Markets Research wrote in a 6 May report.