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NTPC open to buying distressed power units

MUMBAI: In a deviation from its traditional strategy of growing organically, India's largest power generator NTPCBSE 0.72 % is exploring acquisition of distressed power projects to supplement its capacity growth, Chairman and Managing Director Arup Roy Choudhury told reporters here.

"We are open to acquiring a distresses project if the valuations look good and we are allowed to examine the equipment of the plant. But so far no developer has approached us because they know we are very stringent," he said.

The company has cash of Rs 18,738 crore which can be used for funding acquisitions.

"If we get an offer for a project that has used Bharat Heavy Electricals' power equipment then we will go ahead. But if the project used Chinese equipment we will be very cautious and we would examine it very closely. We run projects for 40 years and want to be sure about the quality of equipment," Roy Choudhury said, echoing experts' sentiment over the quality and durability of Chinese boiler and turbine generators.

Highly leveraged infrastructure developers are finding it increasingly difficult to finance the equity required for the projects and raise debt from banks. Power projects in particular are also suffering due to unavailability of fuel and the poor financial health of the key client-the state power distribution companies. Several power projects, owned by independent power producers as well as diversified infrastructure companies, are on the block as developers want to free their equity investment but concerns over the sector and mismatch in valuation expectation.

Many private companies like JSW EnergyBSE -2.02 % and Reliance PowerBSE -2.69 % have recently indicated their keenness to acquire distressed assets. Analysts believe that such a strategy would help these companies add capacity at a cost lower than that of setting up a new project as developers may offer projects at a discount.

NTPC has planned capital expenditure of Rs 20,200 crore for the financial year 2013-14 and is confident of executing it despite challenges related to land acquisition and environment clearances. The power utility added 4,170 mw in 2012-13, its highest ever capacity addition. As of July 31, total installed power generation capacity was 41,184 mw, while 20,064 mw of capacity was under construction, the company said.