PTC India: in pursuit of diverse opportunities

Power trading major PTC India has sharpened its focus on new business areas like power project financing and coal import. The New Delhi-based company is looking for equity investors for its funding arms–PTC Financial Services (PFS) and PTC Ashmore India Energy Infrastructure Fund–even as it has finalised five-year contracts for annual supply of 7 lakh tonne imported coal to various power projects.

The company, a public-private partnership initiative, already extends funding support to power projects through PFS. Its other subsidiary, a $1-billion fund in collaboration with London-based equity firm Ashmore, would fund the domestic power sector.

“PTC India is now looking around for private equity investors for PFS and PTC Ashmore India Energy Infrastructure Fund. Pres- placement documents are ready and the company has started approaching investors,” says PTC chairman Tantra Narayan Thakur.

PTC India started out as a power trading company, but it has diversified into new areas to fashion itself as a complete energy solutions provider. This has been done with an eye on the emerging opportunities in the sector, especially from private players.

The share of the private sector in power generation capacity addition is rising fast, with private players accounting for 45% of capacity addition in 2009-10. The government expects private players to contribute more than 60% of the 100 giga watt (GW) capacity addition envisaged by it under the 12 th Plan. Private players will need both equity and debt funding from institutions given that traditional sources of financing like bank loans, capital market and external commercial borrowing (ECB) have almost dried up.

The fund requirement of the Indian power sector is projected to be huge. By one estimate, the sector would need $-600 billion funding if the capacity addition targets of the power ministry for 11th and 12th Plans are to be met.

PFS, a non-banking financial company, has bagged the infrastructure finance company (IFC) status from the Reserve Bank, which would help the company step up lending to private power projects and mobilise funds at competitive rates.

Before it got the IFC status, the company could lend only up to 15% of its net worth to a single power project being developed by a promoter. But now it will have the flexibility to increase the funding to 25%. PFS can also increase its funding to power projects being developed through a special purpose vehicle to 25% from 20%. The company has a net worthof Rs 625 crore.On the resource mobilisation side, PFS can now issue tax-free infrastructure bonds up to 25% of its net worth. It can raise ECB up to 50% of its net worth without prior RBI approval.

The IFC status will also help PFS secure bank loans at cheaper rates. It is because banks’ risk weightage for lending to an IFC is much lower compared to a non-IFC NBFC. “Funding requirement of up to Rs 100 crore will be met by PFS while PTC-Ashmore will cater for bigger financing requirements of power projects,” the PTC chairman told FE.

PTC’s foray into coal-supply has also gathered steam. “We have signed five-year contracts with sellers and buyers for an annual supply of 7 lakh tonnes of imported coal,” Thakur said. The first shipment of imported coal is expected to arrive in October. PTC will sell 3 lakh tonne of imported coal this year.But the company has not made much progress in its proposal to acquire coal assets abroad. The matter was put up before the company’s board but the directors have asked for more information.