NTPC to offer 20% to QIA in energy JV

The country’s largest power producer NTPC is set to offer 20% stake in its renewable energy joint venture with ADB and Kyuden International Corporation (Kyushu) to Qatar Investment Authority (QIA) as part of its strategy to get secured supply of gas for its fuel-starved power stations. The equity deal is expected to help NTPC clinch a long-term fuel supply deal, reducing its reliance on costly imported LNG secured through commercial deals.

The latest proposal from QIA is in addition to interest shown by the Qatari entity to pick up equity in two other NTPC projects — Kayamkulam in Kerala and Ratnagiri Gas and Power in Maharashtra. NTPC has offered upto 20% stake in these two projects with a rider that the Qatari side also give it long term gas linkages. The deal is still being negotiated. “QIA has offered to pick 20% stake in the renewable energy joint venture company where NTPC is the majority stake holder. We are trying to use this investment to build fuel security for power PSUs gas based plants,” said a government official privy to the development.

Last year, NTPC, Asian Development Bank and Kyushu signed a joint venture agreement to form a JV company to develop projects and establish over a period of three years, a portfolio of about 500 mw of renewable power generation in India. As per the terms of the agreement, while NTPC will hold 50% in the JV, the two other partners will contribute 25% equity each to the new entity. GE and Brookfield, which had earlier decided to participate in the JV, withdrew their candidature in late 2009 have in the wake of the worldwide financial meltdown.

It is expected that QIA will pick up 10% equity held by NTPC and 5% each by other two partners ADB and Kyushu. The total investment in this is still being finalised by the company, said a power ministry official but added that the JV has been proposed to be set up with initial authorised share capital of Rs 6.5 crore and a paid-up share capital of Rs 1 crore. “While the proposal is being considered, it is expected to take some for conclusion as NTPC wants to link investment with gas deal which the other side is reluctant to commit at this juncture,” said the official.

For NTPC, getting firm gas supply is critical to operationalise its over 7500 MW of gas based capacity proposed for 12th Plan. With erratic supply of gas from Reliance Industries KG D6 block, NTPC is looking at options beyond domestic sources to meet fuel requirements for its gas-based projects.While company is buying expensive LNG from Qatar and also making spot purchases, a long term gas supply deal is expected to work to its advantage.