Petition for new power exchange filed with CERC: Deepak Amitabh

Budget can be a very useful mode of pushing investment into any sector where the government wants to pay attention, says Deepak Amitabh, chairman and managing director, PTC India. During an interview with Swati Khandelwal, Amitabh said two power exchanges are required in India as it will help in bringing new products in the market.

What are your expectations from the Union Budget?

Funding is a major challenge for the power sector. So, the government - through the budget - should offer some incentives where in retail investors' money can be used for funding the power sector. The initiative can be something like tax-free bonds, which existed in the past as well, as it will help in bringing retail investors money into the power sector.

Apart from this, we were thinking that whether any more incentives can be planned like a fiscal incentive for energy efficient gadgets. In addition, the distribution sector is facing a huge challenge and it can be partially dealt by providing an incentive structure – through the budget – for those who can afford and want to pay in advance for a period of six months. As, such a step will ease the cash flow problem being faced by distribution companies.

The third thing that comes to my mind is that the power sector should be provided with budget incentives. And I am saying this because the impact of budget incentives – in form of exemptions – to health, insurance and housing sector is visible as they have been able to open new hospitals and health services among others. So, these steps will help the sector a lot.

Besides, certain incentives should be provided to our inefficient generation assets, which should be phased out as they turn up to be a burden on the society, as they consume more coal and produce less electricity and have an impact on the environment. Incentivising these assets will benefit us.

There were talks that PTC is looking to exit wind power business and NTPC and ReNew Power have shown interest in it. Let us know about it?

See, we cannot say anything until something conclusive takes place, but I will not like to name the entity with which we are having dialogues. But the dialogue is on, and I can say that an agreement will be reached soon if everything goes well.

Can you provide a timeline for the deal?

It is likely to be completed in the second quarter.

Expected proceeds from the deal?

Can't comment on it because the market is varying, and we are also facing certain policy challenges in states where we have our wind assets. Actually, the state governments have not been able to understand things, yet, and that's why they keep changing things with certain things like long-term agreed PPAs, where they ask us to reduce or increase things. Thus, such situations can impact the valuation of the asset. But, PTC is not so much focused on valuation because we are very clear about our agenda of exiting from such non-core business over a period. In fact, we are master in trading, a place that has ample opportunities to work, and which is our core.

Anything else from where you want to exit?

Our large investments include PTC energy, where we are working, and PTC India Financial Services which needs funds. So, we have started a discussion on the design. Interestingly, we have invested a lot in PTC and are no more interested in investing more in the segment. So, over a period, these two investments will be used for monetisation. These are our direct investments. Apart from this, we also have an indirect investment in Teesta Urja, where we have invested around Rs 200 crore from PTC balance sheet. Teesta Urja is a government of Sikkim project. So, the project has been implemented successfully and it will be monetised maximum in the next 2-3 years.

Let us know about your role in power exchanges?

As of today, two exchanges have licences in India (i) India Energy Exchange (IEX), which has 97-98% of the market share and (ii) Power Exchange of India (PXIL), who are working but for some reasons have not been able to make a competitive den. So, we have a purpose that two good exchanges should be functioning, however, the volume is a matter of the market. If two good exchanges are functioning then new products will be introduced in the market. In fact, new designs of renewable are coming into the market, but they have a different market requirement. Secondly, distribution companies are feeling the pain of a liquidity crunch. So, there should be a body that can decide on the kind of products should be introduced and cleared. Presence of two healthy and strong exchanges will be beneficial for the end consumers.

By when will the plan be executed?

The initial three shareholders include PTC, Bombay Stock Exchange and ICICI bank. In fact, the network minimum criteria of Rs 25 crore has been capitalised and we have applied for a licence at CERC. It, CRC, is trying to study the future of shareholding pattern and we can't give a timeline to the regulator. Midway, we are supposed to select the IT team, but we will try to keep the process on for the next 2-3 months.

Kind of business that is expected from the exchange and how it will impact your revenues?

PTC, as a standalone, is going to be a shareholder on the platform maybe we have contributed more than 40% in it but will have to bring down the shareholding to 5% by the time the license is provided to us. So, the profits that we can have with 5% shareholding will come over the period.

But, when it comes to volume from this exchange, which has been visualised at our end, and they are able to get new products then PTC as a trader has a volume contribution of around 25-30% in the current exchanges. So, we will like to increase this 25-30% to 40-50%. In fact, we will not be contributing just to PTC exchange but also in the second exchange, whichever is more efficient. Besides, during our dialogue with the government, we will have a discussion on ways to increase the short-term market that is stagnant at 10%, in terms of generation, to 15% and then 20%.