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NTPC plans to hedge foreign currency loans

February 3, 2010

With India’s electricty regulator permitting power generators to pass on the cost of hedging foreign currency loans to their customers, the National Thermal Power Corporation (NTPC) is working on a comprehensive hedging policy, a top company official said.

“Earlier CERC (Central Electricity Regulatory Commission) did not treat the hedging costs as pass through (costs that could be passed on to the customers). Last year, CERC allowed power generators to treat the costs on hedging foreign currency loans as pass through. Hence, we are now formulating a policy for the company which will have to be approved by the company board,” K. Siva Kumar, executive director (Finance) told reporters here Tuesday.

With an installed capacity of 31,134 MW, NTPC is India’s largest power generator.

Nearly 30 percent of NTPC’s total debt of consists of foreign currency loans and bonds.

As on September 30, 2009, NTPC’s debt stood at around Rs.34,697 crore, of which foreign currency loans stood at Rs.10,882.2 crore comprising secured term loans of Rs.659.3 crore, unsecured bonds/notes of Rs.2,428.5 crore and loans of Rs.7,794.4 crore.

According to Kumar the loans are in dollar, euro and yen currencies and not all the loans will be hedged.

Though NTPC’s average cost of funds is around 7.13 percent, it is not in a hurry to borrow more as it is flush with funds Rs.32,000 crore.

The cash and cash equivalents as on September 30, 2009 was around Rs.16,386 crore and the balance consists of bonds that mature at regular intervals.

In addition, the company generates around Rs.7,000 crore every year from its operations.

According to officials, the undrawn long-term rupee loans as on September 30, 2009 stood at Rs.26,849 crore and foreign currency loans comprising of $239.4 million and Yen 1,591 million. The company also had committed and undrawn fund and non-fund based limits of around Rs.1,620 crore.

The company had recently raised Rs.8,500 crore from the State Bank of India and Rs.10,000 crore from the Power Finance Corporation.

Earlier, addressing the media, Kumar said the company is coming out with a public issue of 412,273,220 equity shares of Rs.10 each at a premium of Rs.191 per share. The eligible company employees can subscribe to the issue at 10 percent discount on the floor price.

He said the offer follows the government’s decision to divest five percent of its holding in NTPC. Prior to this, the Indian government’s stake in NTPC was 89.5 percent.

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