The Hindu Business Line : Hydel cos offer States equity stake in projects

New Delhi June 10 With an eye on expediting clearances, an increasing number of hydroelectric power developers are roping in host State Governments as equity players in their projects and are handing out minority equity of up to 49 per cent, over and above the offer of free power to the States.

Both the private and public sector players, in negotiated projects as well as those offered through competitive bidding, see this as a means to speed-up clearances, the delay in which generally hampers the progress of most hydel projects.

GMR Energy, National Hydroelectric Power Corporation (NHPC) and Dutch firm Brakel Corporation NV are among the promoters that are either offering equity or are in negotiations to offer equity to States. While some State Governments offer concessional land in lieu of equity, most of these deals are happening with minimal or no cash outgo on part of States for their stake in these projects, sources involved in the exercise said.

The quid pro quo

The move to rope-in the State as an investor, however, comes with the tacit understanding that the government administration would take up the issue of clearances on a priority basis so that delays in land acquisition and project implementation are averted.

For instance, GMR Energy, which was recently awarded a Rs 900-crore 160-MW project in Arunachal Pradesh through competitive bidding, is offering 12 per cent equity to the State in the project, besides the offer of 14 per cent free power and a two paise per unit as additional benefit to the State.

GMR Energy would be implementing the Talong Hydro Power Project, scheduled for commissioning by end 2011, on a build-own-operate-transfer basis.

NHPC is in talks to offer up to 26 per cent to the Arunachal Pradesh Government for its 3,000-MW Dibang project, besides the 12 per cent free power entitlement for the host State.

In the case of the Rs 2,047-crore Rampur Hydroelectric project — being executed by the Satluj Jal Vidyut Nigam Ltd — the Himachal Pradesh Government has been offered 30 per cent equity participation.

The State is also scheduled to get 12 per cent free power as royalty.

Brakel Corporation NV of the Netherlands, which has been assigned two projects in Himachal Pradesh (the 480-MW each Jhangi-Thopan and Thopan-Powari projects), is discussing the equity offer. Himachal Pradesh is also in talks for equity in NHPC's 2,051-MW Parbati hydroelectric project and NTPC's 800-MW Kol Dam project, with stakes of up to 25 per cent equity being eyed by the State.

Besides equity, sops to host States also include higher proportion of free power against the mandatory 12 per cent.

For instance, AD Hydro Power Ltd — a subsidiary of Malana Power — has offered Himachal Pradesh 15 per cent power produced by its 192-MW plant in the State. Private developers are offering up to 19 per cent free power in Arunachal Pradesh to bag hydro projects, sources said.

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