FE Editorial Unleash power

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Now, with the Left out of the power equation and the market bullish on power sector companies, it is time the government proceeds quickly with the initial public offerings of NHPC Ltd and Damodar Valley Corporation (DVC), which have been long pending. NHPC is slated to issue 10% fresh equity and offload 5% through an offer sale, and DVC has appointed auditing & consultancy firm KPMG to recommend measures to restructure the organisation and work out the modalities for going public, as the company in its present form is not eligible to raise public funds. Other government power companies, which should look at the IPO route to infuse funds and increase capacity are Satluj Jal Vidyut Nigam and North Eastern Electric Power Corporation. In fact, post-trust vote, the power index of the Sensex has gone up by 15% and some power sector stocks like NTPC, Tata Power and Reliance Power have outperformed the markets, quoting higher price-to-earnings multiples than the benchmark Sensex. Share prices of power-equipment suppliers, too, are surging in anticipation of large order bookings—Bhel share prices rose by 13% in the last three days.

Growth of the power sector is critically linked to the growth of a nation and for every 1% rise in GDP growth rate, India’s power sector needs to register a growth of 1.5%. But our past performance has been dismal as the government could never achieve even 50% of the planned capacity outlined in various Five-Year Plans. Now, in the 11th Plan, the government has set an ambitious capacity addition target of 82,000 mw, comprising 30,000 mw hydro, 40,000 mw thermal and 11,000-13,000 mw nuclear power. The country’s total installed capacity is currently 1,44,565 mw. The investment required for new generation, transmission, distribution and rural electrification is pegged at around Rs 5 lakh crore. In fact, a number of power companies are expected to raise Rs 1.5 lakh crore from the market for their expansion plans. National Thermal Power Corporation plans an investment of Rs 29,000 crore, Reliance Power is considering a total capital expenditure of Rs 60,000 crore and Tata Power will invest Rs 12,000 crore in greenfield projects. Investors have already seen the opportunity. A rejuvenated government must do so as well.