Hydro sector firms: Pending matters with states, absence of merchant bankers create divestment hurdles

Indian Express
By Deepak Patel October 31, 2017

While the government has set the divestment target of Rs 72, 500 crore for fiscal 2017-18, it has been able to earn only Rs 19,759 crore through proceeds by October 4.
At a time when the Centre seems far from reaching its divestment target for 2017-18, three central public sector units (CPSUs) operating in hydro sector — THDC India Limited, North Eastern Electric Power Corporation (NEEPCO) Limited and SJVN Limited — listed their divestment issues before Union Power Minister R K Singh last month. In two of these three companies, certain matters are pending with the state governments that are stakeholders in the respective companies. In the third company, merchant bankers have not shown any interest in conducting the divestment process as yet.

While the government has set the divestment target of Rs 72, 500 crore for fiscal 2017-18, it has been able to earn only Rs 19,759 crore through proceeds by October 4. Singh took charge as the Minister of State (Independent Charge) of Power and Renewable Energy on September 5, 2017. The next day, he held a meeting on ‘hydro power development in the country’. Senior officials of the ministry, CEA, the Bhakra Beas Management Board, THDC India Ltd, NHPC Ltd and NEEPCO Ltd attended the meeting.

At the meeting, Archana Agrawal, joint secretary in the Ministry of Power, gave a presentation that listed the issues hampering the divestment of aforementioned three hydro sector CPSUs. In 2013, the Central government proposed to divest 10 per cent paid up equity of the THDC India Limited (THDCIL) by way of initial public offering (IPO). THDCIL is a joint venture of the Central government and the Uttar Pradesh government, with the Centre owning a majority share of 75 per cent.
“The divestment process is held up pending consent of government of Uttar Pradesh for amendment to Memorandum and Articles for reduction of their Board nominees from 2 to 1 in compliance with the DPE (Department of Public Enterprises) guidelines and listing requirements of Sebi (Securities and Exchange Board of India) regarding composition of Board,” the presentation stated. THDCIL is not a listed company. However, it was awarded Miniratna Category-I status in October 2009, which was upgraded to Schedule A status in July 2010.

Total installed capacity of the THDCIL presently is 1,513 MW. THDCIL has two hydro generating stations namely Tehri Stage-I (1,000 MW) and Koteshwar hydroelectric project (400 MW) and two operational wind power projects in Gujarat, one at Patan (50 MW) and another at Devbhoomi Dwarika (63 MW). The company has a portfolio of 18 projects with a capacity of 6,374 MW under various stages of operation and development. As on May 31, 2017, the PSU has an authorised capital and a paid up capital of Rs 4,000 crore and Rs 3623 crore, respectively.

On April 12, 2017, the Cabinet Committee on Economic Affairs approved listing of NEEPCO by divesting 25 per cent of the central government’s shares through IPO. On April 11, 2017, the Central government floated the Request for Proposals (RFPs) for appointment of legal advisers and Book Running Lead Managers (BRLMs) — also known as merchant bankers — for “listing and divestment”. Submission of bids for RFPs to select merchant bankers was extended up to May 15, 2017. “DIPAM (Department of Investment and Public Asset Management) informed that no proposal was received. The DIPAM is proposing for fresh issue of RFP,” the September 6 presentation stated.
“The Board of Directors was apprised on the proposal for divestment and listing of shares of NEEPCO. The Board authorised the CMD to take all necessary steps for starting the process. For smooth completion of the process of disinvestment an internal committee has been constituted comprising of the senior officers of the company,” the presentation added. NEEPCO’s current networth is Rs 5,873 crore and its paid up capital is Rs 3,452 crore, according to the Ministry of Power. NEEPCO has an installed hydroelectric capacity of 1287 MW.

SJVN Ltd has an installed hydroelectric capacity of 1964 MW. The Centre and Himachal Pradesh government own 64.46 per cent and 25.51 per cent, respectively. The remaining 10.03 per cent is owned by general public. This 10.03 per cent was divested by the central government in May 2010 through the IPO process.

“The company (SJVN Limited) is required to comply with minimum public shareholding norm of 25 per cent by August 2017. But Himachal Pradesh government has refused to divest its shares in the company. Himachal Pradesh government has also refused to tender its shares in any buy-back offer,” the September 6 presentation stated.

“… if Central government offloads it shares to public to comply with aforesaid Sebi requirements, Central government share in the company would fall below critical level of 51 per cent and the company would lose its CPSU status. In fact, the SJVN would neither remain a CPSU nor a state PSU and not even a privately held company as none of the party would be holding 51 per cent or more shares in the company,” the presentation added.

Reference-http://indianexpress.com/article/business/business-others/hydro-sector-firms-pending-matters-with-states-absence-of-merchant-bankers-create-divestment-hurdles-4914673/