NTPC Ltd, Asia's second-biggest power utility by value, will almost double purchases of coal from outside India this fiscal year to curb fuel shortages at its plants, said two company officials familiar with the plans.
The state-run Indian company will import 17 million tonnes of thermal coal in the year started 1 April, compared with 9 million tonnes the previous year, the people said, asking not to be identified as they are not authorized to speak to the media. NTPC's plants in the states of Uttar Pradesh, Orissa, Chhattisgarh and Andhra Pradesh face a shortage of coal.
Power producers in India are relying on imports of the fuel to bridge a shortfall in shipments from Coal India Ltd, the nation's monopoly supplier. Land acquisition hurdles and delays in federal approvals for mines are depriving power plants of coal supplies and keeping almost 400 million in the world's second-most populated nation without electricity.
Increasing imports has become a must for NTPC since many of its plants are running with alarmingly low coal stocks, said Lakshminarayana Ganti, an analyst at Standard Chartered Securities India Ltd, who has an outperform rating for the stock. Adequate fuel availability is critical to NTPC's earnings.
Sales in the three months ended 31 March increased 1.2%, the slowest pace in almost three years, because of the lack of coal. Revenue may rise 11% to Rs.17,700 crore in the quarter ended 30 June, according to an average estimate of two analysts compiled by Bloomberg.
NTPC shares rose 1.50% to Rs.152.50 on BSE on Monday. The stock has declined 4.1% this year, compared with a 1.4% gain in the benchmark S&P BSE India Sensex.
More than 33 power plants in the country, with a total generation capacity of 31,320 megawatts, had coal stocks of less than seven days as of 21 May, according to the power ministry's Central Electricity Authority, which monitors the development and operation of power plants in the country. Stocks of less than 15 days are considered critical.
Of NTPC's 15 coal-fired plants that have a combined capacity of about 31,855 megawatts, units generating more than 7,000 megawatts don't have any fuel-supply accord with Coal India. These units receive coal on the basis of an agreement that doesn't include any penalty clause for a drop in quantity.
NTPC said on 4 April Coal India doesn't supply the grade of coal it is paid for and it will sign accords for those units only if the miner assures a minimum grade of coal.
Coal availability at plants that do not have a fuel-supply agreement with Coal India is a big issue, Ganti said. In the near-term, the big catalyst for the stock would be signing of these accords.
The utility generated 60.3 billion kilowatt hours of electricity in the three months ended 31 March, little changed from a year earlier, despite adding generation capacity. Production stagnated because of a 10% drop in coal imports, Chirag Shah and Anuj Upadhyay, analysts at Mumbai-based ICICIdirect.com wrote in a 13 May note. NTPC added 4,160 megawatts of generation capacity in the year ended 31 March.
Imported coal is especially critical for those plants that have yet to sign the fuel supply accord with Coal India.
Declining international prices are also encouraging Indian power producers to import coal. Indonesia, the world's biggest exporter of power-station coal, cut its reference thermal coal prices by 3.65% for May, bringing them to the lowest level in five months.
Falling international coal prices and a lack of availability from domestic sources is fuelling India's coal imports, said Ashish Sethia, country manager, India at Bloomberg New Energy Finance.
Indonesian reference prices for this month stand at $85.33 a tonne for coal of 6,322 kilocalories per kilogram. Coal India's price for the grade is Rs.3,970 ($71.50) a tonne.
NTPC has placed an order for 7 million tonnes of imports, the people said. Adani Enterprises Ltd, the nation's biggest thermal coal importer, won the tender for 4.5 million tonnes, while state-run trading company MMTC Ltd won the bid for 2.5 million tonnes, they said.
The utility will import another 10 million tonnes in two phases during the year, the people said.