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19 Nov 2024
After NTPC Green’s Rs 10,000 crore initial public offer (IPO) expected around November, almost a dozen more such issues are likely to hit the market over the ensuing months, with state-run energy companies seeking to bolster the capital bases of their newly incorporated green subsidiaries.
These IPOs are part of a larger plan of these companies – Coal India, ONGC, SJVN, NHPC, India Oil and NLC India – to create robust climate-friendly asset bases, and enjoy the tax reliefs for new greenfield ventures (see chart). While a clearer picture will emerge only later, the combined value of these IPOs could easily run to tens of thousand crores, according to official sources and market experts.
While the sequence of the IPOs will unravel over the next few months, the government, especially the Department of Investment and Public Asset Management has been encouraging the energy sector CPSEs’ plans to float subsidiaries and joint ventures to take advantage of the lower corporate tax regime of 15% for new manufacturing firms, sources said. These firms have set up new wholly owned green subsidiaries before the March 31, 2024 deadline for being eligible for the concessional corporate tax.
Besides taking advantage of low tax, another incentive to set up green JVs is that it’s easier to find equity partners for such businesses, than for the parent companies. The companies are channelling their retained earnings to fund their green forays, also because these debt-free assets are to easier be securitised, and monetisated, if need be.
In line with the government’s ambitious RE capacity addition target and the goal of net zero emission by the year 2070, energy sector CPSEs are undertaking renewable projects or pooling their existing renewable assets into their new subsidiaries, analysts said.
NTPC is on the path of building up RE capacity of 60 GW by 2032 and NTPC Green Energy is its flag bearer in renewable energy journey with an operational capacity of over 3.4 GW and 26 GW in the pipeline including 7 GW under implementation.
“IPO is one of the good ways of monetisation. NTPC Green Eenrgy’s model could be emulated by the likes of NHPC, SJVN and NLC ,” a senior official said.
SJVN Green Energy Limited (SGEL) has around 3.6 GW assets currently in the pipeline which are expected to be commissioned in the next two years. SJVN is expected is expected to incur more than Rs 20,000 crore capex in FY25 out of which more than Rs 15,000 crore is expected to be incurred for renewable capacity addition entirely through SGEL.
“All the energy companies which are in brown and also those which are green already, even they are doing further green and into other green areas from wind to soar to hydrogen,” the official said.
NHPC, India’s leading hydropower company, has set up a wholly owned subsidiary NHPC Renewable Energy Ltd (NREL) which be used to house already commissioned solar capacity, and the ones in the pipeline after they are commissioned. NHPC has a total installed capacity of 7097.2 MW of renewable energy (including wind and solar) through its 25 power stations, including 1520 MW through subsidiaries.
The Centre has set an ambitious target of having an installed renewable energy capacity of 500 GW by 2030. As of May 26, 2023, coal/lignite CPSE has installed solar capacity of about 1656 MW and windmills of 51 MW. Total Renewable energy is planned to be installed at 5570 MW of renewable capacity by 2030. NLC’s wholly owned subsidiary NLC India Green Energy Limited (NIGEL) has signed the Power Purchase Agreement (PPA) with Gujarat Urja Vikas Nigam Limited (GUVNL) for the proposed 600 MW Solar Power Project at Khavda Solar Park, Gujarat.
CIL has incorporated two new subsidiaries i.e. CIL Navi Karniya Urja Limited for the development of non-conventional/clean & renewable energy and CIL Solar PV Limited for the development of the solar photovoltaic module.
India’s top oil explorer ONGC has set up a subsidiary ‘ONGC Green Limited’ recently engage in businesses related to green hydrogen, hydrogen blending, renewable energy including solar, wind and hybrid, bio-fuels and bio-gas business and liquefied natural gas.
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