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Kohinoor Mandal

Both NTPC and SAIL were for quite some time considering the merger of these two entities as they are in the same business of power generation and under the same management. Even the chairman and CEO of the two are same.

Kolkata , Jan. 5

TWO of India's leading public sector enterprises - Steel Authority of India Ltd (SAIL) and National Thermal Power Corporation Ltd (NTPC) - are set to merge two of their existing 50:50 joint ventures into a single entity.

The two JV companies are NTPC SAIL Power Company Pvt Ltd (NSPCL) and Bhilai Electric Supply Company Pvt Ltd (BESCL). While the first one was established in March 2001, the second was in March 2002.

According to a senior SAIL official at the corporate cell, the proposal has already been approved between the board of directors of the respective companies. "The SAIL board is likely to approve it in the next meeting which is scheduled on January 27. Once it is cleared, the merger process would begin," sources told Business Line.

It was learnt that the board of directors of NTPC also is likely to consider the merger proposal soon. Both NTPC and SAIL were for quite some time considering the merger of these two entities as they are in the same business of power generation and under the same management. Even the chairman and CEO of the two are same.

Sources said the proposed merger would help both NTPC and SAIL in reducing the operational, administrative and managerial expenses. The combined entity is expected to emerge much stronger financially.

Capacity addition: At present, the total capacity of NSPCL is 120 MW, and it runs two 60 MW units, each located adjacent to the Durgapur and Rourkela steel plants. BESCL's total capacity is 74 MW and is spread over three units, all located at Bhilai Steel Plant.

BESCL is adding new power capacity of 500 MW (2 x 250 MW) at Bhilai. The estimated cost of this project is Rs 2,480 crore. NTPC and SAIL are investing 30 per cent of the project cost and the rest is funded through market borrowings.

The first unit is expected to be commissioned by the end of March 2007 and the second by October 2007.

This unit would reduce Bhilai Steel Plant's dependence on the Chhattisgarh State Electricity Board (CSEB).

At present, the steel plant has an agreement with CSEB for contract demand of 197 MVA.

The new plant would also reduce Bhilai Steel Plant's power expense from Rs 4.2/kWh (as charged by CESB) to Rs 2.6-2.7/kWh.

More Stories on : Mergers & Acquisitions | Power

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