National Thermal Power Corporation (NTPC) Ltd and Bharat Heavy Electricals Ltd (Bhel) may rope in a private sector equity partner for a joint venture.
New venture is for engineering and construction work
NEW DELHI: National Thermal Power Corporation (NTPC) Ltd and Bharat Heavy Electricals Ltd (Bhel) may rope in a private sector equity partner for a joint venture the two are planning to float for engineering and construction work for power plants.
A senior executive in one of the two companies said a provision for accommodating the third partner would be kept even as there might be a lock-in period, within which NTPC and Bhel cannot sell, transfer or mortgage their share of the equity.
To begin with, the joint venture company would have 50% equity partnership between Bhel and NTPC.
The executive said the two partners are planning to sign an agreement before the month-end.
“The provision for the third partner will be kept in order to keep the government equity in the joint venture below 49%. This helps in faster decision making since the company may not have to go to the government for clearances at every stage,” said the executive.
Sources said the proposal to limit government equity was initiated from the Bhel side. One of the things that needed to be sorted out is what exactly the joint venture would do.
While NTPC wanted both companies to support the joint venture by way of awarding contracts, Bhel wanted NTPC to give 800 MW supercritical boiler contract to the new entity on a nomination basis. The technology has not been tried in India as yet.
The JV might threaten NTPC, given that both the parent and joint venture are into the engineering, procurement and construction (EPC) business for power plants.
Though Bhel and NTPC are government-owned, both have not been on the best of terms, blaming each other for the lapses in meeting the Tenth Plan targets.
The two finally came together in September when they signed a memorandum of understanding for forming the joint venture for EPC of power plants and are now working out the details of the joint venture agreement.
Bhel is the biggest domestic power plant supplier and NTPC is the biggest power producer.
Sources said differences between the two companies still exist, especially over the period of lock-in and the role of the two companies. A lot seems to have been sorted out by the intervention from the Prime Minister’s Office.
“The ministry of finance is mediating between the two,” said a source.
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