NTPC will increase its renewable energy play with its acquisition of the government’s stake in North Eastern Electric Power Corporation Ltd (NEEPCO) and THDC India Ltd (THDCIL).

Last week, the Centre raised ₹11,500 crore by divesting its 74.49 per cent stake in THDCIL, in addition to completely selling off its stake in NEEPCO.

THDCIL is a 75:25 joint venture between the Government of India and the UP government.

“Apart from adding to the equity and earnings, NTPC will benefit from a 5 per cent capacity addition. With these acquisitions, NTPC will tap the hydro opportunity and is on road for big renewables aspirations,” said Rupesh Sankhe, Vice-President, Elara Capital. The acquired assets include hydro and solar energy plants. These two acquisitions are strategic fits to NTPC, said Swarnim Maheshwari from Edelweiss Research.

NTPC is India’s largest power generation company with 53.6 GW in installed capacity. It plans to establish a 10 GW renewable portfolio by 2022. It now has 113 MW of wind power.

Gaining from THDCIL

The total installed capacity of THDCIL is 1,513 MW. It has two hydro power generating stations — Tehri HPP (4X250 MW) and Koteshwar HEP (4X100 MW) — and two operational wind power plants in Gujarat, one at Patan (25X2 MW) and another at Devbhoomi Dwarika (30X2.1 MW).

It has good financials, too. In FY19, THDCIL reported a net profit of ₹12,500 crore and an operating income of ₹28,500 crore, against ₹7,700 crore and ₹21,800 crore, respectively, in FY18.

The NEEPCO advantage

With the acquisition of NEEPCO, NTPC gets a strategic advantage with regard to supplying power in the North-East. NTPC will now address one-third of the power demand in the region.

NEEPCO has 1,457 MW of generation capacity in operation, of which 925 MW is hydro based, 527 MW is gas based, and the balance 5 MW is solar power based. It is also at an advanced stage of commissioning the 600 MW Kameng hydroelectric project in Arunachal Pradesh.

In FY19, the company reported a net profit of ₹2,100 crore and an operating income of ₹20,000 crore, against ₹2,300 crore and ₹16,300 crore, respectively, in FY18.

NTPC plans to expand its generation portfolio to 130 GW by 2032, with 30 per cent of revenues coming from non-fossil fuel-based resources. The acquisitions are expected to add 2.9 per cent to its FY21 earnings. At a combined valuation of ₹11,500 crore, the deal is 3 per cent EPS-accretive on FY21 earnings without taking into account any synergies, noted Edelweiss.