Post-merger REC to remain govt entity: Power Ministry

Mumbai: Allaying concerns of the investors over the proposed acquisition in REC by the PFC, joint secretary Ministry of Power Arun Kumar Verma said the former will continue to be a government entity and that the process of price determination for the transaction is underway.

Power Finance Corporation (PFC) is likely to close the deal by March 31 this year and is not considering extending open offer to the minority stakeholders, Verma said while addressing a media conference here.

"According to regulations, PFC should have a major hold post acquisition. In this case PFC is a government company and REC will also continue to be a government entity.

Government will have a control and it will remain a central public sector enterprise (CPSE)," Verma said.

When asked about the concerns over the possibility of breach of regulations (regarding government control) post the acquisition, he said, "when investors look at investments, the scout for safe zones. If there is any interpretation, then it can be negotiated. In such kind of transactions, care is taken for all aspects."

Trying to settle dust over the speculative numbers floating in the market regarding pricing, Verma said, "transaction price has not been finalised yet and the process of determining the final amount is underway."

Speaking at the event, PFC chairman and MD Rajeev Sharma, said the company was planning to fund the transaction through debt from the market and/ or payments received on loan assets from borrowers including interest.

"With regard to the funds required through debt from the market, we are already in discussion with lenders and we don't see any issue whatsoever going forward. We are also not considering extending open offer to the minority stakeholders post the acquisition," Sharma added.

He further said the acquisition is an inorganic growth opportunity for PFC which will provide it a competitive edge in the future and create a common platform for power sector financing.

"We will benefit through the widespread geographical reach of REC and will also be able to leverage its expertise in transmission and distribution (T&D) space. On the other hand, REC will be able to leverage the expertise of PFC in the generation space," Sharma added.

Currently, the exposure of REC in T&D is nearly 45 percent, while PFC's share is cliose to nine per cent.