Amid controversy over the legality of hydroelectric projects run by NHPC in Jammu and Kashmir, ABL Srivastava, the company’s director finance has said that there is no illegality involved in it whatsoever.
We will be definitely putting up our point that the RoE with respect to the hydro projects should be increased so as to atleast bring it at par with other segments of the power sector.
Amid controversy over the legality of hydroelectric projects run by NHPC in Jammu and Kashmir, ABL Srivastava, the company's director finance has said that there is no illegality involved in it whatsoever.
In an interview to CNBC-TV18, Srivastava said that if any political party rakes up the issue of taking away projects from NHPC, the company will take the matter to the power ministry.
NHPC and J&K government have locked horns over several projects which the former is operating in the state.
While the government says, the company has no right over any projects of which the agreement has expired long back and hence ownership of projects is that of the state, NHPC argues that the projects are in accordance the agreement of Transfer of Property Act and in line with the Central government mandate.
Srivastava pointed out that due to the controversy, capacities and projects have been stalled and this is an area of concern for the company. Another concern in the low rate of return on equity. NHPC has requested the Central Electricity Regulatory Commission (CERC) to review return on equity (ROE), he added.
Below is the edited transcript of Srivastava's interview to CNBC-TV18.
Q: What are the ongoing differences that you have with the Jammu and Kashmir (J&K) government and their insistence on taking over projects? What kind of resolutions are you expecting to see?
A: As far as National Hydroelectric Power Corporation (NHPC) and the ministry of power is concerned, there is no question of returning back any project to the J&K as of now. Few days back also, it was clarified that we have formed a joint venture (JV) with the J&K government where we are having 49 percent stake , 49 percent stake is with the J&K government, J&K Power Development Corporation (J&KPDC) and the remaining 2 percent is with PTC.
Therefore, none of the projects, that we are holding today is on the way or is going back to the J&K government. That is the stand, of the government of India and the NHPC till date. Incase, the issue is again raised by the J&K government, we will be putting our points to the ministry of power for taking appropriate decision and taking into consideration the interest of NHPC too.
Q: The bigger fundamental concern from a medium-term perspective is what happens to capacity addition for NHPC over the next couple of years because some of your key projects like Subansiri seem to be stalled?
A: Yes. The capacity addition is an area of concern. In the current financial year, we had been able to add one project on the Chamera of 213 megawatt (MW) and 44 megawatt (MW) of the Chutak projects. With respect to the Teesta Low Dam Project-III, two units have been commissioned and we are hopeful that remaining two units will be commissioned.
The Subansiri project concerns are very valid. We are also very disappointed because since December 2011, no work is going on this project. The ministry of power and NHPC is making all efforts in consultation and cooperation with the government of Assam so that work can be restarted. There has been a Joint Steering Committee and other committees to resolve the issues. However, unfortunately, the issues have not been resolved till date and as of now, we are not in a position to commit the exact date by when the work will restart.
Q: The other thing in debate has been whether you can get your return on equity (RoE) up and can you attract more investment into the hydropower projects. Do you think there is a possibility that the government might relent and give a higher return on investment?
A: The low return in hydroprojects has been an area of the concern. We have approached the CERC and have told that if they take the effective return on the hydroprojects, then considering the higher gestation period in hydroprojects, the effective return will be lesser.
For example, if we take the four-year gestation period where there is no return during the construction period, the effective RoE is only 13 percent. If it is a six years gestation period, it comes to 11.67 percent. Therefore, we requested the CERC to reconsider this aspect. The CERC has been kind enough to increase the RoE from 15.5 percent to 16.5 percent. Still, that is not sufficient. When the next tariff for 2014 comes for consideration, we will be definitely putting up our point that the RoE with respect to the hydro projects should be increased so as to atleast bring it at par with other segments of the power sector. I am hopeful that looking to the hydro potential requirements in the country, the request should be favourably considered.
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NHPC stock price
On January 30, 2015, NHPC closed at Rs 19.30, down Rs 0.5, or 2.53 percent. The 52-week high of the share was Rs 29.60 and the 52-week low was Rs 17.35.
The company's trailing 12-month (TTM) EPS was at Rs 0.77 per share as per the quarter ended September 2014. The stock's price-to-earnings (P/E) ratio was 25.06. The latest book value of the company is Rs 23.55 per share. At current value, the price-to-book value of the company is 0.82.
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