New Delhi: State-run hydropower company NHPC Ltd is set to raise about ₹2,300 crore this financial year, surpassing its initial target of ₹2,000 crore, as part of the Union government’s monetisation target and to fuel its expansion.
NHPC plans to raise the amount by securitising the return on equity of its Dulhasti Power Station in Jammu and Kashmir for eight years, said two people in the know of the development. The company will, however, retain ownership of the project.
Securitisation is the process of converting an illiquid asset or group of assets or their expected future cash flows into investable security. Investors are paid interest and principal on these securitised assets.
The move assumes significance as the power sector accounts for 7% of the total value of the assets on offer under the Union government’s national monetization pipeline. For NHPC, a Navratna status company, the monetisation is crucial to fund the expansion of its hydropower, pump storage, and solar power projects.
NHPC has sought bids from banks and non-banking financial companies for its securitisation plan. The financial institution offering the lowest discounting rate or the highest amount for securitisation would be selected and the Dulhasti Power Station project pledged with it.
“The discounting rate expected is around 7.9%, which is pretty good, and NHPC would retain the ownership of the project,” said one of the persons mentioned above, adding that NHPC will use the money raised for capital expenditure. “So, in a way, it is a loan for the company, and a win-win approach.”
The second person mentioned above said the initial plan was to implement the monetisation process in the third or fourth quarter of 2024-25 but had to be hastened because of a need for liquidity.
A spokesperson for NHPC confirmed the development, adding that the company will retain “full control and ownership of the project” and that the securitisation would be completed in October or November.
The monetisation pipeline
NHPC has implemented a similar securitisation earlier. In FY24, the hydropower major raised ₹2,046.94 crore by monetising the return on equity of its Kishanganga Power Station for eight years, as per its annual report.
India’s national monetisation pipeline includes power generation assets totaling 6 gigawatt (GW) of hydropower and renewable energy assets accounting for ₹39,832 crore, and power transmission assets accounting for as much as ₹45,200 crore.
State-run power sector companies have firmed up a mix of models to realize maximum value. These include creating a holding company and then divesting stake in it to raise money, initial public offerings (IPO), cashflow monetisation, and setting up infrastructure investment trusts.
Also read | Broken dams, crippled plants: Climate calamities hike insurance costs for hydropower firms
The Niti Aayog, which came up with the national monetisation pipeline, has listed potential core assets of Central government ministries and public sector enterprises for monetisation from 2021-22 to 2024-25. The plan includes assets with monetisation potential of ₹6 trillion during the period. In FY24, assets worth ₹14,690 crore were monetised under the power ministry.
NHPC aims to more than double its power generation capacity from 7,144 MW currently to 14,561.20 MW by 2026-27. Its net profit in the April-June quarter declined 5.66% from the same year-earlier period to ₹941.07 crore, while its revenue fell 2.29% to ₹2,694.20 crore.
NHPC shares have gained about 41% so far in 2024, ending Tuesday’s trading on NSE at ₹93.47, down 0.82%.
Catch all the Business News , Corporate news , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
MoreLess