New Delhi: Over 5,000-mw existing captive power projects may have to correct their equity and shareholding structures after the government proposed to tighten guidelines following complaints of irregularities.
The power ministry issued draft amendments in provisions relating to captive generating power plants on Tuesday evening. Experts said the ministry acted upon several complaints from stakeholders against dummy group captive plants. They said the governments move is a key reform is to prevent misuse of particularly group captive power plants provisions. ET had on May 29 last year reported group captive power plants may have to rejig equity structure.
Group captive power plants — based on coal, solar and wind – are operational in large numbers in the states of Karnataka, Haryana, Rajasthan, Maharashtra and Tamil Nadu. The concept was evolved by industries to avoid the cross-subsidy charges levied on inter-state electricity sale and is seen as a threat to state discoms.
Majority of the companies owning such group captive power plants, , particularly 5,000-mw renewable energy capacity in Tamil Nadu, might have to restructure their equity and shareholding pattern before April next year.
The government has changed the definition of Ownership for captive power plants that should now be in terms of value of capital along with the voting rights and not in terms of number of shares only.
“For the purpose of assessing status as captive generating plant, a normative debt: equity ratio of 70:30 will be considered i.e. atleast 26% of the equity base of 30% of capital employed, in the form of equity share capital with voting rights (excluding equity share capital with differential voting rights) needs to be invested by captive users,” the proposed amendments read.
“Among other proposed measures, consumer's equity contribution to be assessed on normative leverage of 70:30 may require existing CPPs to significantly change capital structure. In a progressive environment, may be government should let financing parameters to be guided by market forces,” he said.
Former Central Electricity Authority Ravinder said, “This was a long due reform to prevent flagrant abuse of the intent of law to encourage group captive power plants by some IPPs, and it was causing financial loss to distribution companies.”
The power ministry had received complaints from various sections that industries are misusing the concept by taking members through shallow investments of small amounts and without giving them voting rights.
A power ministry official said due to lacunae in policy, some captive power generators misused the provision by issuing shares of lower denominations to captive users and with differential voting rights, a power ministry official said. As a result, the so called captive users were supplied power pro-rata to number of shares owned and not proportional to equity capital invested. In fact such group captive users having a nominal equity capital had no virtually no stake in the group captive plant.