State-owned hydroelectric power major NHPC plans to form joint venture companies with private sector hydel project developers to rehabilitate their projects hit by a shortage of funds and lack of technical expertise. Under a proposal being finalised by the NHPC management, the company will pick up stakes of up to 49% in private hydro projects. These projects were allocated by various state governments to private players on the basis of financial commitments and promise of free power to sections of consumers.

As per the plan, the PSU will be able to exercise control over the JVs with powers to nominate managing directors.

The proposed arrangement is expected to come handy for NHPC. While it will not lose any business at hand, the JVs would facilitate the PSU to regain control of a few projects that were taken away from it by the state governments in favour of private sector developers.

At present there are about 66 hydro power projects allocated to various private sector developers by different states but are yet to be taken up for implementation.

?State governments face a unique situation as many of the projects that they awarded to private sector developers who showered goodies to the state have failed to take off. NHPC remains the only hope as it could not only provide equity to fund-starved projects but also bring in necessary technical expertise,? said a power ministry official.

Already, a proposal has come from KSK Upper Subansiri Hydro Electric for inclusion of NHPC as a joint venture partner in the special purpose vehicle (SPV). The project was earlier entrusted with NHPC for implementation but was later offered to KSK by the Arunachal Pradesh government.

Twenty-one of the private sector projects facing delays ? with a total power generating potential of 24,780 MW ? are more than 500 MW in size, and have been allocated to 13 developers.

Another 24 projects with a total capacity of 7,617 MW, are with 20 developers, and 21 more projects with a total capacity of 2,796 MW are with 15 developers.

?All these projects are delayed due to various reasons and presents an opportunity for NHPC,? said an NHPC official.

It is expected that NHPC would initially pick up stakes only in the case of projects for which preliminary feasibility reports have been prepared. The techno-commercial attractiveness and presence of NHPC near the location of the project in the state would be another important criterion.

As per government guidelines, NHPC can invest up to 15% of its net worth or Rs 500 crore in each of these joint ventures. The overall ceiling on such investments in all projects put together is 30% of the net worth of the PSU. NHPC could also rope in other strategic investors, co-developers, consultants and even state governments as equity partners in the proposed JV arrangement.

NHPC will only invest in SPVs of private developers that have entered into power purchase agreements for selling 60% of the power to beneficiary states. The debt to be raised by the JV company for implementation of the project would be on non-recourse borrowing from NHPC. Alternatively, NHPC could also lend its balance sheet support to the SPV, in which case the total borrowing limit of the PSU would be enhanced.

Though the country has enormous potential to build large capacities of hydro power projects, developments have so far been sluggish. Various impediments in the form of resettlement and rehabilitation issues, land acquisition, environment and forestry clearances and financing have affected development of projects. Out of a total installed capacity of just over 200,000 MW, the hydro capacity in the country is only 39,000 MW.