NHPC to raise Rs 2,300 crore for expansion

NEW DELHI: State-run hydropower company NHPC Ltd will raise approx. $2,300 crore in the current financial year, exceeding the initial target $2,000 crore as part of the Union government’s monetization target and drive its expansion.

NHPC plans to raise funds by securitizing the return on equity of its Duhasti power station in Jammu and Kashmir for eight years, two people familiar with the matter said. However, the company will retain ownership of the project.

Securitization is the process of converting illiquid assets or groups of assets or their expected future cash flows into investable securities. Investors will receive interest and principal on these securitized assets.

The move is significant as the power sector accounts for 7% of the total value of assets provided in the federal government’s national monetization pipeline. For NHPC, which has Navratna status, monetization is crucial to fund the expansion of its hydro, pumped hydro and solar projects.

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NHPC has solicited bids from banks and non-banking financial companies for its securitization scheme. Select the financial institution with the lowest discount rate or the highest securitization amount to pledge the Duhasti Power Station Project.

“The discount rate is expected to be around 7.9%, which is quite good, and NHPC will retain ownership of the project,” one of the people mentioned above said, adding that NHPC will use the funds raised for capital expenditure. “So, in a way, it’s a loan and a win-win for the company.”

The second person mentioned above said that the initial plan was to implement the monetization process in the third or fourth quarter of 2024-25, but it had to be accelerated due to liquidity needs.

A spokesperson for NHPC confirmed the development, adding that the company would retain “full control and ownership of the project” and that the securitization would be completed in October or November.

Monetization pipeline

NHPC had implemented similar securitization earlier. In fiscal year 2024, the hydropower major increased $According to its annual report, it earned Rs 2,046.94 crore by monetizing eight years of equity returns from its Kishangan power station.

India’s national monetization pipeline includes hydropower assets and renewable energy assets totaling 6 gigawatts (GW) $398.32 billion rupees, with transmission assets accounting for as much as $452 billion rupees.

State-owned power industry companies have identified various models to maximize value. These include creating a holding company and then divesting its equity to raise capital, an initial public offering (IPO), monetizing cash flow and setting up an infrastructure investment trust.

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Niti Aayog has proposed a national monetization pipeline, listing potential core assets for monetization by various central government ministries and public sector enterprises between 2021-22 and 2024-25. The program includes assets with monetization potential $6 trillion during the period. FY2024, Asset Value $The Power Ministry monetized Rs 14,690 crore.

NHPC aims to more than double its power generation capacity to 14,561.20 MW by 2026-27 from the current 7,144 MW. Net profit fell 5.66% year-on-year in the April-June quarter $941.07 crore, while its revenue fell 2.29% to $2,694.20 Crores.

NHPC shares have gained about 41% so far in 2024 and were trading on the NSE on Tuesday $93.47, down 0.82%.