Compensate us before exiting power trading exchange, PFC tells NTPC

The fight between state-owned Power Finance Corp. Ltd (PFC) and NTPC Ltd over the National Power Exchange (NPE) has become interesting, with PFC asking India’s largest power generation utility for compensation and reimbursement of its Rs.2.19 crore equity investment, along with 13% interest as missed opportunity cost. This investment was made by India’s largest power-sector financier in the electricity trading exchange. PFC’s attempt is to stymie NTPC’s plan to quit the yet-to-be operational platform, which has state-owned NHPC Ltd and Tata Consultancy Services Ltd (TCS) as partners. While NHPC has also evinced interest in quitting the exchange, no such communication has been received by NTPC from TCS. “We have written to NTPC that they can’t exit like this as they were the lead in this partnership. If they want to leave, they should return our money that has been invested, along with interest,” said an PFC executive, requesting anonymity. A power exchange functions on the lines of commodity exchanges and provides a platform for buyers, sellers and traders of electricity to enter into spot and forward contracts. The exchange primarily identifies the price for the following day, which is the electricity sector’s equivalent for the spot price. It would also provide a payment security mechanism to buyers and sellers. India has two operating power exchanges — Power Exchange of India (PXIL) and India Energy Exchange ( IEX). This isn’t the first time NTPC has fallen out with its partners on the proposed exchange, where NTPC, NHPC and PFC each hold 16.67% stakes. TCS holds the balance 50%. NTPC had earlier fallen out with the National Commodity and Derivatives Exchange of India in the creation of the exchange. NTPC’s board on 7 November decided to exit NPE due to the change in the electricity trading market scenario, and communicated this to PFC, NHPC and TCS. “We don’t want to be in power trading. We have decided to exit and have got a permission from the power ministry,” said Arup Roy Choudhury, chairman and managing director of NTPC. While the exchange was planned on the premise that a sizeable portion of power generated in the country would be transacted through power exchanges, currently only around 2% of power is being traded through power exchanges. Also, due to fuel woes, not much growth is expected in the electricity trading market. “PFC, through its letter dated February 8, 2013, communicated PFC’s constrain to invoke certain provisions of the joint venture agreement and demanded compensation, i.e. Rs.218.70 lakh + 13% interest as opportunity cost,” an NTPC spokesperson said in an email. “In its reply to the letter dated February 18, 2013, NTPC informed that NTPC Ltd is a professionally managed company, with a high level of corporate governance policies.” The reason for the decline in the electricity trading market is attributed to the inability of state electricity boards (SEBs) to buy costly power. While there is growing competition on the part of electricity suppliers, the demand for traded power is faltering as SEBs across India are saddled with losses because of power theft, technical losses during transmission and distribution, and billing inefficiencies.


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