NTPC, NHPC may find it tough to exit national power exchange

Written by Noor Mohammad | Noor Mohammad | New Delhi | Updated: Feb 4 2013, 09:12am hrs
NTPC and NHPC could find it tough to pull out of the yet-to-be-operational National Power Exchange ( NPX), with the other two shareholders, Power Finance Corporation (PFC) and Tata Consultancy Services (TCS), learnt to be against their exit. It is expected that PFC and TCS might invoke key provisions of the shareholders agreement signed for the project, sources said.

NTPC, NHPC and PFC each hold 16.67% stake in the proposed exchange, while the balance 50% is with TCS. NTPC and NHPC cannot exit the project as they have not secured other shareholders consent, said PFC chairman Satnam Singh. TCS management has supported PFCs stand.

The agreement signed between the four companies provides for a five-year lock-in from the commencement of business. Since the exchange has not yet started operations, the lock-in period remains intact. NTPC and NHPC will have to bring down their respective shareholding to below 10% to exit.

NTPC recently announced its decision to leave the project, saying the proposed exchange was inviable, given the low volume of exchange-traded electricity in the country. NHPC followed suit.

The idea to set up the proposed exchange was mooted by NTPC itself, which later invited other companies to support its initiative. The shareholders agreement was signed in 2008. Later, electricity regulators approval to run the exchange was secured in 2009. PFC and TCS, which came on the board at NTPCs persuasion, are disappointed by its decision to exit the project. NTPC was spearheading the initiative to launch the national power exchange. That is the reason we came on board, said Singh.

He was very categorical that if NTPC and NHPC want to exit the project, they should either find other companies to replace them or sell their stakes to existing partners.

Two power exchanges Power Exchange of India ( PXIL) and India Energy Exchange ( IEX) are already operational. However, the volume of power traded through them is very low about 3% of total electricity generated in India which does not inspire much confidence that a third exchange will be viable, especially when PXIL is already running into huge losses, according to NTPC.

NTPCs fear is not baseless as some promoters of the National Power Exchange have favoured the idea of merging with one of the existing power exchanges given the bleak market scenario. Another reason why NTPC and NHPC have lost interest in the proposed power exchange is a recent regulation by the Central Electricity Regulatory Commission, which bans power trading by those exchange shareholders who may have more than 5% stake in it.