NTPC set to pull plug on plan to buy DVC’s Bengal plant

By: | Published: December 19, 2015 1:17 AM

In what could jeopardise the state-run thermal power producer Damodar Valley Corporation's (DVC) debt reduction strategy, NTPC is likely to shelve a plan to take over DVC's 2,520 MW Raghunathpur plant...

Although NTPC had been conducting due diligence on the project for a final takeover in December, sources in the company indicated that the deal was unlikely to get the board's approval now.Although NTPC had been conducting due diligence on the project for a final takeover in December, sources in the company indicated that the deal was unlikely to get the board’s approval now.

In what could jeopardise the state-run thermal power producer Damodar Valley Corporation’s (DVC) debt reduction strategy, NTPC is likely to shelve a plan to take over DVC’s 2,520 MW Raghunathpur plant in West Bengal after the railways conveyed that it wasn’t interested in buying power from the utility.

The first phase of the Raghunathpur plant was scheduled for commissioning in 2010 but even after a delay of nearly five years and a revised cost estimate of R7,500 crore, the utility continues to suffer from issues related to land acquisition for the rail and water corridors. Besides, the plant has failed to tie up a buyer.

Although NTPC had been conducting due diligence on the project for a final takeover in December, sources in the company indicated that the deal was unlikely to get the board’s approval now. “The acquisition made sense till the time we thought we had a buyer in the railways. However, the transporter has recently conveyed that after entering into a PPA (power purchase agreement) with Ratnagiri Power, it didn’t require any more capacity from Raghunathpur,” a senior NTPC official told FE on the condition of anonymity. He added that project’s inability to resolve land acquisition issues made it no longer desirable.

Gr5

Besides signing the PPA with Ratnagiri Power, the railways’ demand for power in the eastern part of the country will be met through a 1,000 MW joint venture thermal power project in Nabinagar, Bihar, which is likely to be commissioned by the end of the fiscal.

DVC, the second largest state-run thermal utility after NTPC with over 6,000 MW capacity, has accumulated over Rs 30,000 crore in debt in the last decade primarily owing to delays in project execution. In the last fiscal, the firm incurred over Rs 1,300 crore of operational losses on a turnover of Rs 11,500 crore.

With the proposed takeover by NTPC, the company was hoping to save monthly interest cost of nearly Rs 80 crore on debt of Rs 6,000 crore for the plant.

Despite its troubles, DVC has started work on the second phase the thermal plant with two units of 660 MW each, which is estimated to cost nearly Rs 10,000 crore.

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