State-owned domestic power major NTPC Ltd says the ongoing funds crunch in the financial markets will not affect its funding plans. Following the recent move by the government to lift the cap on ECB loans by the infrastructure companies, NTPC is in final stages of tying up details with the foreign bankers and multilateral agencies to raise $500 million loan through the ECB route in the remaining five months of the current financial year.
Alongside, NTPC has also told the power ministry of its plans to form a separate subsidiary company for development and acquisition of assets in other countries including power projects, coal mines, oil and gas fields, liquefaction and re-gasification terminals. Sources said that an overseas company by NTPC on the lines of ONGC Videsh Ltd is also on the anvil.
FE met the chairman and managing director NTPC, R S Sharma, and also its director (finance), A K Singal, to know more about these plans and also to understand how the financial meltdown in the global money markets will impact companies like NTPC, with huge funds requirement to meet its capacity addition target of adding 22,000 mw by 2012 for which funds requirement has been pegged at Rs 88,000 crore.
Sharma disclosed that NTPC has been in talks with foreign banks for its fund raising through the ECB route and will raise anywhere between $150-250 million by January 2009. ?We are currently in the process of appointing the mandated banker who would assist us in raising money, either through a syndicated loan or through a US private placement (USPP), one market that is still alive. We are also close to signing a deal with a multilateral agency for raising $200 million under the ECB route and another $120 million is coming from JBIC,? he added.
On the setting up of an independent subsidiary, Sharma said the proposal is at the discussion stage only. ?We feel that it is time that crucial issues like fuel security be it acquiring coal mines or gas blocks are addressed by NTPC. We need to put an aggressive strategy in place and create an organisation which can focus on these issues should be created. We are still to take this proposal to the board,? he said.
On his part, Singal said the company was sitting on a cash surplus of Rs 18,000 crore and its cash reserves are a whopping Rs 50,000 crores. Besides NTPC is getting Rs 2,400 crore annually out of its bonds. Around Rs 2,000 crore of funds will be raised through the domestic bond market (via the private placement route). Then, NTPC has also been sanctioned Rs 10,000 crore line of credit by Power Finance Corporation (PFC), which it plans to utilise over a period of time.
?NTPC has also contracted some loans from the domestic market and the undrawn portion of this loan is about Rs 16,000 crore. We do balance sheet funding and so why should we raise funds at the time the bankers are asking a interest of 12.5 to 13%. Why should I contract loans at these rates when I am comfortable with the fund position available with me. NTPC will look at raising funds from the bankers when the rate of interest will fall,? Singal said.
In its annual meeting with the domestic lenders in May, they committed Rs 17,000 crore to NTPC but because of the financial turmoil world over, only Rs 350 crore has been sanctioned so far. ?As the interest rates have climbed, we are not taking money from them and will instead utilise the funds available with NTPC?, Singal said.