Biggest Indian Utility Said to Mull Buying Distressed Generators

(Bloomberg) -- NTPC Ltd., India’s largest electricity producer, is considering buying power plants run by indebted RattanIndia Power Ltd. and Jaiprakash Power Ventures Ltd., according to people familiar with the matter.

NTPC is doing an internal assessment of RattanIndia’s plants at Nasik and Amravati in the western state of Maharashtra and Jaiprakash’s Nigrie plant in neighboring Madhya Pradesh state, the people said, asking not to be identified as the talks are private. The state-run generator will consider bidding if the creditors to the two companies decide to take these assets to bankruptcy court after failing to resolve debt issues.

Several projects could end up in bankruptcy courts if India’s Supreme Court decides at a scheduled hearing on Nov. 28 to lift an ongoing moratorium barring lenders from pursuing bankruptcy action against power producers. The power industry accounted for 5.65 trillion rupees ($78 billion) of loan exposure as of March, including debt that would be considered delinquent under the new rules, according to a report by a lawmakers’ panel.

An acquisition would allow New Delhi-based NTPC to expand at a lower cost, compared with building a new plant. These projects match the utility’s needs as they have working plants and machinery, railway connectivity, availability of water and regulatory approvals. It would also mark a shift in strategy for the company as it has mostly stayed away from competitive bids to boost capacity.

Raising funds for an acquisition will not be difficult for NTPC, the people said. The company had a cash balance of about 44 billion rupees ($616 million) as of March 31, according to data compiled by Bloomberg.

NTPC and Jaiprakash didn’t immediately respond to emails seeking comment, while RattanIndia Power’s Managing Director Jayant Shriniwas Kawale declined to comment.

The producers have argued that delayed payments from electricity buyers, fuel shortages and late compensation for costs impacted their cash flows and constrained them from complying with rules that required banks to start debt resolution after a single day’s default.

RattanIndia’s two plants have a combined installed capacity of 2,700 megawatts, while Nigrie has a capacity of 1,320 megawatts. NTPC could add more plants to its list of targets, the people said, adding a bid will be made only after the projects are listed in bankruptcy court.

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