In a bid to ensure better functioning of generating unit, lieutenant Governor Najeeb Jung has given his assent to merge the two power gencos Indraprastha Power Generation Company limited (IPGCl) and Pragati Power Corporation limited (PPCl). This has been apparently done to save one power generation company that has been running into huge losses, whereas the other company has been making profit. The decision is expected to resolve the financial mess as the merger will remove confusion in the Government and will cut costs.
It is noteworthy that the erstwhile Sheila Dikshit Government had approved a plan for merger of these two power gencos after examining the report of SBI Capital Markets limited regarding merger of PPCl into IPGCl. The merger of these two companies delayed due to unknown reasons.
The new merged company would be known as IPGCl. All employees of PPCl would become the employees of IPGCl and shall be governed by the rules and policies of IPGCl. The new company will also take up renewable energy activities and would also facilitate setting up of 220 kV GIS sub-station at Rajghat after decommissioning of Rajghat Power House.
In a letter to Managing Director of IPGCl/PPCl, Delhi Government Power Department has made it clear that after the merger, the new company should ensure that the terms and conditions of the employees are not altered to the disadvantage and the merger process should ensure seamless integration force to common work culture.
“Merger will facilitate lot of saving of paperwork, efforts and cost while dealing with regulators and statutory authorities like DERC, CERC, Appellate Tribunal, Income Tax Authorities. Both the companies are now required to file separate petitions and appeals with all authorities and give separate advertisements to meet the statutory requirements,” it said.
Officials say that merger of both companies will facilitate appointment of single auditors, thereby saving a lot of time, efforts and money on internal audit, statutory audit, CAG. “Creation of single company will help in overall reduction of general overheads as presently in number of areas separate staff has been appointed to look after both the companies for same type of work,” said officials.
In future, there is also a plan to shut down Rajghat Thermal powerhouse after the operation of module two of Pragati III and setting up of 220 KV GIS sub-station at Rajghat for evacuation of power by DTl.
The SBI Capital Markets in its report has stated that the combined entity would have stronger balance sheet with four gas based power projects in Delhi and interests in Joint Venture (JV). For further fundraising, it may look at listing at appropriate time.
“The accumulate losses of the IPGCl may provide tax benefits to the merged entity. The various accounting, compliances and transaction costs would go down. The top management is common for both the companies. With
higher capital base leading to better gearing, the merged entity would have lesser financial risk and cash flow of one project can be utilised towards another project without any restriction and tax leakage,” it said.