BHEL to float non-banking finance firm to fund power projects

BHEL to float non-banking finance firm to fund power projects

Bhopal: State-run Bharat Heavy Electricals Ltd (BHEL) on Sunday said it plans to float a non banking finance company (NBFC) along with a strategic partner to finance power projects.

“BHEL will soon set up an NBFC," company officials said here.

The engineering and manufacturing firm has already started the process of selecting a consultant, which would undertake a feasibility study and advise it on setting up the NBFC, they said.

BHEL, a navratna company with cash reserves of over Rs10,000 crore at its disposal, had floated a tender for appointment of the consultant last week and is likely to award a contract by next month, the officials said.

The company plans to leverage the funding support to attract potential customers for its equipments, they said, adding that at the same time, it wanted to optimize returns on its cash reserves of Rs10,000 crore, mostly parked in low- yielding government securities.

“The proposed NBFC will act as our investment arm. BHEL will pick up a minority stake in the proposed NBFC and get other strategic investors on board," the officials said.

The NBFC would be a separate entity and BHEL would continue to focus on power equipment manufacturing, which is its core business, they added.

BHEL’s move will definitely help promote private participation in the power sector, the officials said.

Private players, which contributed as much as 45% towards capacity addition in 2009-10, are facing a severe fund crunch, as traditional sources such as the stock market and external commercial borrowings have dried up because of the economic downturn, they said.

The plan to set up an NBFC is a part of the company’s broader strategy to generate demand for its power equipment, officials said.

In a bid to leverage its newly inducted technology and bring down production costs, BHEL has picked up minority stakes in many state power projects to generate demand for its supercritical power equipment, they said.

“This is part of our business strategy to create demand for our 800-MW supercritical power equipment. It also helps state power generation companies which are facing a resource crunch for capacity addition."

BHEL is also keen to pick up equity in solar power projects planned by public sector oil companies like IOC and HPCL as strategic investors, they added.