 "Satyanarayan Goel")
Indian Energy Exchange (IEX), the country's largest in this segment, completed six years of operation this month. The anniversary comes at a time spot power prices have hit rock bottom, boosting volumes. IEX is, therefore, preparing for an Initial Public Offer (IPO), its managing director and chief executive officer, S N Goel, tells Sudheer Pal Singh. Edited excerpts:
What is the current status of your IPO plans and stake sale by Financial Technologies (FTIL)?
Our shareholders include power sector companies such as Adani, Tata, Reliance, PTC, Lanco and Rural Electrification Corp, apart from private equity funds such as Multiples, Bessemer Venture and Lightspeed Venture. We are now fairly established and growing decently well. Therefore, we are exploring the option of an IPO to provide value and liquidity to our shareholders. By a recent order of the Central Electricity Regulatory Commission (CERC), our anchor promoter, FTIL, is required to divest its entire stake, of 25.6 per cent. They are working on it.
Is your other promoter, PTC India, also looking for an exit option?
Not to my knowledge.
Multiple states have denied open access to consumers or have imposed a high cross-subsidy surcharge to discourage it. Is that a concern, given the huge participation of such consumers on IEX?
Anything that affects the market's development impacts us. The buyers in the short-term market are either distribution companies or industries. Our volumes have certainly been hit due to open access-related constraints faced by industries across states.
However, IEX is only a facilitator. The larger impact of such constraints is borne by the buyers who are the ultimate beneficiaries and it is they who have to forego the competitively priced power available on the exchange. Open access was introduced as a cornerstone of the Electricity Act, 2003, to promote competition in the power sector. Thus, the state regulators and policy makers have the onerous responsibility to promote competition and ensure market development on a sustained basis.
How serious is the issue of transmission constraints for evacuation of exchange-traded power? Has the integration of the southern grid helped?
Over the past 10 years, there has been considerable focus on power generation capacity addition. So, we have significant private participation in it. At least 25 independent power producers are operating. However, there are only a few private players in the transmission segment. Many state utilities have missed out on investing in intra-state transmission systems. This needs to be addressed with utmost priority. The country needs transmission highways that can transport power from the generation centres in the east to demand centres in the north, west and south. In 2013-14, IEX lost 5.3 billion units (BUs) of volume owing to unavailability of a transmission corridor. This implies power generators lost at least Rs 2,000 crore worth of business.
A plan to set up India's third power exchange, NPXIL, to be promoted by NTPC, NHPC, PFC and TCS, was shelved recently. Also, many traders have surrendered their licences of late. How bad is the power trading market?
Multiple entrants come up whenever any new industry opens up but only a few survive in the long run. This also applies to the power trading business. When the power sector opened in 2003, many companies applied for a licence, thinking trading is easy business as it does not require huge investments. However, many of these entrants lacked an understanding of the power market. At the end of March, there were 42 inter-state trading licences approved by CERC. Large entities such as PTC, NTPC Vidyut Vyapar and Tata Power Trading occupy a significant share of the market. The remainder share is not enough to sustain the remaining trading licensees economically. A trading company needs at least five-six BUs of volume in a year to break even.
