Indian Energy Exchange (IXI) and Power Exchange India Ltd (PXIL) have received a major relief as the Central Electricity Regulatory Commission (CERC) has given one year extension up to January 20, 2014 to comply with the regulatory provision on statutory shareholding pattern. As per CERC's Power Market Regulation, any shareholder other than a member of the exchange can have a maximum of 25% of shareholding, a member of the power exchange can have 5% shareholding subject to a maximum of 49% of shareholding by all members of the exchange taken together.
As per those regulations the power exchanges, which had received approval prior to January 21, 2010, were required to achieve the shareholding pattern within a period of three years by January 20, 2013.
However, IEX, which currently clocks daily turnover of 70 million units, in its petition said that Financial Technologies which was holding 100% equity in the exchange as on June 2008 had brought down to 44%. IEX spokesman told Business Standard "In the petition it is submitted that Financial Technologies has expressed its inability to bring down its shareholding at the desired level and has requested to seek further extension of time of three years.
However, CERC has granted one year." Other shareholders including PTC India Financial Services has reduced shareholding to 5% from 26%, while Tata Power, Reliance Energy, Adani Enterprises, IDFC, Lanco Infratech, Rural Electrification have brought down to 4.12% from 5%.
On the other hand, PXIL, which has a daily turnover of 1 million units, said the stakes of NSE as on date have been brought down to 32.57% from 50% and the stakes of NCDEX as on date reduced to 28.23% from 50% in March 2010. Further, GMR Energy, Gujarat Urja Vikas Nigam, West Bengal State Electricity Distribution Company and Tata Power Trading Company, which are members of PXIL, are holding more than 5% of share capital which need to be pruned to 5% each. PXIL spokesman said "We are happy about the development and are confident that we will be able to comply with the CERC regulations within the extended time frame."
Both IEX and PXIL submitted their separate petitions to CERC that factors like volume (2% of the total generation of electricity) being traded in the exchanges, absence of long term contracts and clear defined policy to implement open access, stagnant volumes of trade and problem of coal are matters of concern from the investors' point of view.
These factors in turn have the impact on bringing down the shareholding pattern in line with the Power Market Regulations. CERC observed that difficulties expressed by both the exchanges to achieve the statutory shareholding pattern appear to be genuine and they be granted some further time to achieve it.
According to IEX, one option to reduce the stake is to sell its 5.14% share through private equity (PE) sale or offer of sale and the other option is to increase the base equity capital of the exchange in order to bring down the Financial Technologies stake to 25%. However, IEX submitted that no private equity investor was willing to buy such a small quantum of shares and the company has no requirement of any additional funds to raise its capital base.
Further, FII purchase is restricted to secondary market only and no non resident investor/entity including person acting in concert, would be able to hold more than 5% of the equity in these companies.
PXIL said it was interacting with private equity, strategic and institutional investors. Introduction of longer term produces (delivery beyond 11 days) is stuck in regulatory imbroglio for over two years now which has seriously impacted the growth of the exchange market.
Source- Business Standard