11,835.656.25
Stock Analysis, IPO, Mutual Funds, Bonds & More

Merger with NHPC not in national interest: SJVN, THDC

NHPC in particular drew sharp criticism from SJVN and THDC executives attending the assembly, held on July 9 at NHPC's Faridabad office.

, TNN|
Last Updated: Aug 22, 2014, 11.36 AM IST
0Comments
NHPC in particular drew sharp criticism from SJVN and THDC executives attending the assembly, held on July 9 at NHPC's Faridabad office
NHPC in particular drew sharp criticism from SJVN and THDC executives attending the assembly, held on July 9 at NHPC's Faridabad office
Tax Calculator
(This story originally appeared in on Aug 22, 2014)
NEW DELHI: The power ministry's high-voltage idea of creating a state-run hydel behemoth under the umbrella of NHPC has tripped even before it could crystallise into a proposal.

An assembly of top executives from Satluj Jal Vidyut Nigam Ltd, Tehri Hydroelectric Development Corporation and Neepco and NHPC has arrived at a "consensus" that their merger would "neither serve national interest nor accelerate capacity addition... and raise tariff" for consumers.

NHPC in particular drew sharp criticism from SJVN and THDC executives attending the assembly, held on July 9 at NHPC's Faridabad office, for unilaterally appointing SBI Caps for a concept paper, which was submitted to the power ministry without running it past the chiefs of the companies that are proposed to be merged with NHPC.



SJVN and THDC are the Centre's joint venture with Himachal Pradesh and UP, respectively. So their opposition, based on hard economic facts and ground reality, is understandable. But even Neepco, which primarily caters to the north-eastern region and 100% owned by the Centre, was opposed to merger with NHPC.

SJVN has written to the ministry giving 11 reasons against the merger that came to the fore during the executives' assembly. Broadly, the core argument against merger is that each company is facing issues that are distinct to their projects and require "dedicated attention and active intervention" of the top management. This focus would be diluted in the proposed behemoth. The changes in the shareholding pattern of SJVN and THDC required after the merger has also been cited as a hurdle. Both Himachal and UP are now "substantial shareholder" with over 25% holding in respective JVs.

They would lose this status since the number of shares in the merged entity transferred to them would fall short of the percentage needed to retain this position. As a result, projects could lose their active support in resolving issues such as land acquisition or relief and rehabilitation.

Sources said THDC's case was cited as an example of the states' unwillingness to reduce their holding. The UP government has consistently opposed changes in THDC's memorandum and articles of association to clear the way for Centre's disinvestment plan in the company.

There would also be substantial financial implications for the Centre since the state government would have to be fully compensated for the assets under merger rules. For THDC, UP had transferred land and other assets created by its irrigation departments at nominal value. In case of merger, the state could seek full compensation at present market rates.

There was also the fear that the merged entity would get a credit rating lower than what SJVN or THDC now enjoy. This would make loans costlier and increase interest costs for the merged company. The combined effect of these financial issues would raise tariffs.

Also Read

NTPC-THDC-NEEPCO deal to conclude in FY20: DIPAM Secy

THDC bonds issue oversubscribed

NTPC Board okays acquisition of govt stake in NEEPCO, THDC

Investors holding THDC, NEEPCO paper may have a windfall

NTPC may shell Rs 10,000 crore for Centre's stake in NEEPCO, THDC

Comments
Add Your Comments
Commenting feature is disabled in your country/region.

Other useful Links


Copyright © 2020 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service