Promoters strive to deal with regulatory hiccups
The promoters of the National Power Exchange (NPEX), NTPC, NHPC, Power Finance Corporation (PFC) and Tata Consultancy Services (TCS), are striving to finalise schedule to make the exchange operational. They expect to make the exchange operational by the end of December.
At present, two exchanges — the Indian Energy Exchange (IEX) and Power Exchange India (PXI) — are struggling to increase daily transactions. IEX clocks a daily turnover of 20,000-25,000 Mwh (900-1,200 Mw) at an average price of Rs 4-4.50 per unit and PXI’s daily transaction is around 2,000-5,000 Mwh (100-200 Mw) at the same price.
An NPEX executive, who did not want to be quoted, told Business Standard on Monday: “The regulatory hiccups, unstable power market and the lack of a decision on the procurement of a technology, either domestically or from abroad, are the leading reasons that keep on changing the project implementation schedule.
Initially, the launch was planned in December last year. However, it had to be pushed after the Central Electricity Regulatory Commission (CERC) issued draft Power Market Regulations on the shareholding of power exchange and its net worth. Later, the launch was planned for March, but it is not possible as CERC issued final regulations on January 20 and promoters have to take a call on the procurement of technology.”
The executive admitted that there were limitations in the procurement of technology, as it could be sourced from Europe, and not the US, due to restrictions in its applications here.
The NPEX executive said the tenders for the technology and their award would take at least four to six months. “The NPEX board is scheduled to meet in the second week of February, when it expects to decide the revised schedule after deciding the future course of action, based on CERC regulations. All efforts will be made to make the exchange operational by the end of December,” the executive added.
NTPC, NHPC and PFC hold 16.67 per cent, while TCS holds 50 per cent equity in NPEX. However, the promoters have agreed that shareholding in NPEX would be restructured in such a way that TCS’ 50 per cent equity is brought down to 16.66 per cent by the issue of more share capital.
The NPEX executive informed that a major hurdle was the provision relating to the equity incorporated in the Power Market Regulations, released by CERC. According to these regulations, the members trading on the exchange cannot hold more than 5 per cent equity directly or indirectly. “Suppose NTPC Vyapar Vidyut Nigam (NVVM), which is NTPC’s wholly-owned subsidiary, becomes member of the exchange. NTPC cannot hold more than 5 per cent in the exchange. It will have to reduce its equity to 5 per cent in three years. If equity is brought down to 5 per cent, NTPC loses the promoter’s status. So, different models need to be worked out to maintain NTPC’s status,” the executive added.
So far as the regulations relating to a minimum net worth of Rs 25 crore is concerned, the executive said NTPC and other equity holders would not have any problem.
A Mumbai-based analyst, who requested anonymity, said: “NTPC and other promoters need to carefully analyse the impact of CERC regulations. Besides, the timing of the proposed exchange will also have to be finalised after taking into consideration the trends of emerging power market. IEX and PXI operations are also affected due to the lack of open access by states and congestion in transmission.”
