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Home News Power Sector News NTPC under pressure to expand, sell cheap power: Arup Roy Choudhury

NTPC under pressure to expand, sell cheap power: Arup Roy Choudhury

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NTPC ChairmanNTPC is under a lot of pressure to expand and deliver cheap power but faces a big challenge as its customers, the state-owned power distribution companies, are not buying electricity due to their poor financial health, forcing the company to run plants at low capacity, NTPC chairman Arup Roy Choudhury said.

But despite the obstacles, the state-run power generator is going ahead with plans to expand, organically and inorganically, even as the private sector has pulled the plug on investments in the beleaguered power sector. The company is close to making its second acquisition by buying assets of Damodar Valley Corporation (DVC) as part of its strategy to buy 10,000 mw of distressed assets.

"The poor health of discoms is our biggest concern. Even if power purchase agreements are signed, there's no guarantee that they will be honoured. We are worried about the health of discoms and their offtake. They should have the money to buy electricity," said Roy Choudhury.

Debt-laden discoms have been buying less electricity, opting for load shedding, forcing generating companies to run their units at less than full capacity. NTPC's plant load factor, a measure of electricity generated by a unit compared to the maximum it can, has declined to about 62% in the June quarter.

"There is a lot of pressure on us. The pressure is mainly to bring in reduction in cost of power. NTPC is trying to generate 30 billion units of cheap power this year in the range of Rs 2-2.25 a unit. But who will buy it?"

"Another problem is that the transmission network connectivity in the national grid is not complete and we can't transfer power. So, even my units which generate power for as low as Rs 2.50/unit are running at 70% PLF," said Roy Choudhury.

According to rating firm CRISIL, 46,000 mw of power projects are facing viability issues due to lack of long-term buyers for electricity, inadequate fuel supply, and aggressive bidding to win projects and coal blocks. Of this, 36,000 mw are coal-based projects within which tariff under-recovery has impacted 20,000 mw of capacities, while the rest are reeling because of inadequate feedstock and poor electricity offtake by discoms.

Roy Choudhury said that the central government's decision to not offer a bailout to discoms, as has been the tradition, is a correct move and that discoms need to become commercially viable by introducing better practices. He said that the company now aims to expedite acquisition of distressed assets, especially the state-owned ones to reduce the pain in the sector. After acquiring the Patratu power plant in Jharkhand, NTPC is close to acquiring units totalling 2,520 mw from DVC.

"We will close the DVC deal soon. We are also talking to Rajasthan and Madhya Pradesh for acquisitions. We would first acquire distressed assets of the states, after we finish that we will look at private sector assets to fill in the gaps," Roy Choudhury said.

NTPC has a list of shortlisted private sector projects that it would consider for acquisitions but the priority would be to acquire projects owned by the public sector or by state agencies. Many power projects, owned by independent power producers as well as diversified infrastructure companies, are on the block as developers want to free their equity investment but there are concerns over the sector and mismatch in valuation expectations.

Source - ET


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