Speaking to newspersons on the sidelines of the US Investment Summit, Kumaramangalam said Rs 14,500 crore NTPC would buy the shares of NHPC at face value, and part of the transaction amounting to Rs 2,500 crore would be completed in the current fiscal while the remaining part would be concluded in the next. ``NHPC will thus become a fully-owned subsidiary of NTPC after the buyout. The deal will put NTPC in a much stronger position to raise the massive resources required for its expansion programmes, by leveraging its enhanced equity support,'' Kumaramangalam said.

``The government does not lose control of the company in this type of a deal. Further, NTPC hadalready planned to enter hydro power sector in a major way, so this decision comes as a sequential step to its strategy,'' he added.

Since both the companies are entirely owned by the government, the money paid by NTPC would flow into the central coffers, in turn helping the government to narrow down the fiscal deficit, he added. Besides, National Thermal Power Corporation (NTPC) will sell some of its power stations and use the sale proceeds for reinvestment, Kumaramangalam added.

Kumaramangalam said NTPC would set up a subsidiary company which will hold some of its power stations that it plans to sell and then sell 51 per cent of the company to private investors. "The money will not go the Government of India. It will remain with NTPC for reinvestment," he said. In fact, the Disinvestment Commission was asked to look into the possibility of dilution in the Government stake in NTPC and the commission also was of the view that the Government should retain its stake in the power company.

Besides, as oneof the cash-rich PSUs, NTPC was not short of funds for capacity augmentation. In view of the comfortable debt: equity ratio of the company, it can easily raise additional funds from domestic and foreign agencies as evident from the fact that NTPC has been accessing funds from the overseas market at an attractive rate. The Centre, at one point of time, was seriously considering disinvestment of it stake in NTPC as part of its overall policy to get out of the PSUs. NTPC is the largest power company in the country with an installed capacity of around 18,000 mw. NPTC now plans to increase it to 30,000 mw by 2007 and 40,000 mw by 2012. It is also setting up several major power projects. The thermal power major also plans to enter into hydel power generation.

Recently, the NTPC has diversified into related areas by forging alliances with Indian and foreign companies. It has a joint venture with BSES, the Mumbai-based power company, to undertake turnkey equipment procurement and construction works for powerplants. The joint venture - Utility Powertech - has already been awarded projects from parent companies.

NTPC has also recently set up a 50:50 joint venture with ABB of Germany to undertake renovation and modernisation (R&M) projects. The takeover by NTPC would not bring about any change in the management structure of NHPC, Kumaramangalam said.

He said the government and the company had already identified the units to be hived off, but refused to divulge further details. The finer details of the plans would be worked out on the basis of the recommendations of ICICI, the consultants for the deal. The Minister said the government had no intention to disinvest its holding in NTPC. The Indian government plans to securitise around Rs 1,200 crore of the various state electricity boards' dues owed to government-owned power companies and coal companies, Kumaramangalam said.

A special purpose vehicle was being created to take over the state electricity boards' dues, he told reporters on the sidelines of a pressconference. "...The SPV will enter into agreements with SEBs, becoming the conversion organisation which will make the tradeable bonds that is given to the public sector encashable," he said.