Financial Daily from THE HINDU group of publications
Sunday, Apr 11, 2004
Industry & Economy - Power
PTC mulls stake in power generation projects
Balaji C. Mouli
New Delhi , April 10
POWER Trading Corporation (PTC) is considering the possibility of acquiring up to 10 per cent equity stake in power generation projects. According to sources, the company's top management is currently engaged in an active internal debate on the issue.
Further, this issue is slated to be discussed by the Board of PTC when it meets later this month to consider the financial results.
PTC, the power trader, proposes to support power generation projects by private promoters facing "last mile" equity problems situations where the project promoters has sewed up all but 10-15 per cent of the equity and is facing a problem in funding it. By taking an equity position, PTC can help secure a long-term arrangement for trade in power produced by the generation company. This symbiotic relationship could ensure power generator access to the markets in an optimal manner besides assistance in undertaking financial closure.
The draw back in the arrangement is that PTC will not be able to recover its investments in the short run. This is since generation projects have a long gestation period.
Currently, PTC does not have the funds to undertake investments in the equity business. However, the company plans to undertake measures to raise resources as and when required.
According to company officials, PTC could acquire equity stakes in a few companies before undertaking large-scale equity acquisitions.
On the trading front, the company is trying to enter into contracts with power generators for purchase of power on a long-term basis. It plans to enter into long-term agreements with power utilities for sale of a substantial part of this power. The remaining would be traded in the short term market.
The company has signed an agreement for purchase of power from the West Seti hydel power project in Nepal. On the domestic front, PTC has entered into Heads of Agreements with several projects.
In a bid to develop the power trade market, PTC plans to offer advisory services. On this front, it proposes to offer services in regard to settlement of bills accrued in the trade of power across regions. Since the Regional Load Despatch Centres (RLDC) which monitor the intra-region power movements are not linked electronically online, the possibility of setting up a power exchange will not take place immediately. However, once this happens, PTC plans to participate in the exchange in a big way.
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