CERC Grants Additional Time To HPX To Meet Min Net Worth Norm

Govt Orders To Extend Dispute Avoidance Mechanism For All Power Projects

The Central Electricity Regulatory Authority (CERC), in its latest order, granted the Hindustan Power Exchange Limited (HPX) additional time to meet the minimum net worth norm. HPX is one of the few operational power exchanges in India.

CERC asked HPX to meet the criteria within one year. Photo by-Freepik

As per the CERC (Power Market) Regulations 2021, these power exchanges are bound to meet the minimum net worth criteria of Rs 50 crore at all times. However, the HPX failed to meet the criteria. Later it moved the CERC seeking relief and sought additional time to meet the same. 

HPX started operations on July 6, 2022. As per the details of the detailed CERC order, at the time of registration, HPX had a total net worth of Rs 55.25 crore, which plunged to Rs 51.66 crore on March 31, 2022, and reached Rs 47.88 crore on June 30, 2022. HPX later told the CERC that its net worth sank further to Rs 41.64 crore by May 19, 2023. 

However, the power exchange claimed that the promoters decided to infuse additional equity to meet the minimum net worth criteria. It said its promoters agreed to purchase around Rs 7,90,50,000 of new equity shares to meet the minimum net worth norm of the CERC. 

As mentioned in the detailed order, the case details said that due to the dearth of sufficient volumes, HPX was unable to attain break-even and profitability. At the same time, it needed to invest much in infrastructure, rentals, investments, and other expenditures to set up its business. 

“The Commission has adopted a broad regulatory approach to multiple power exchanges to promote competition among power exchanges because of its inherent benefits, viz., product innovation, enhanced services, price control, etc. In this context, the Commission has, from time to time, allowed certain relaxations to the exchanges with lower liquidity towards fulfillment of their regulatory compliances, which has yielded results in terms of an improved performance and increase in competition. We have observed that the volume traded at the Petitioner’s power exchange has also increased over the last few months, particularly in the term-ahead contracts,” the order said.

The CERC, while pronouncing its verdict in the case, allowed one-year additional time for HPX to meet the criteria. “We have noted the efforts made by the Petitioner to inject more capital, including the Promoters’ plans to inject approx. Rs.7,90,50,000 worth of additional capital. In light of the above, we are of the view that the Petitioner may be granted additional time to meet the minimum net worth requirement stipulated in the PMR, 2021,” the order said.

“Keeping in view the significance of net worth in preventing business risks and in view of the discussion in the paras above, the Commission hereby directs the Petitioner to achieve the minimum Net Worth required under Regulation 14 of the Power Market Regulations, 2021, within one year of the date of this order,” the order said.  

List of promoters of HPX. Source: CERC order