NTPC is translating its vision of becoming an integrated power major into a reality.
NTPC Limited, the third largest company in India in terms of market capitalisation, is drawing on all its resources, human and material, to translate its vision of a world class integrated power major, powering Indias growth, with increasing global presence into a reality. It is engaged in fulfilling its declared mission of developing and providing reliable power, related products and services at competitive prices, integrating multiple energy sources with innovative and eco-friendly technology and contributing to society. And the efforts seem to be yielding results.
In all segments of activity, NTPCs performance appears to be impressive and improving constantly. For instance, the companys profit after tax for the financial year 2007-08 stood at Rs.7,415 crore compared with Rs.6,865 crore in 2006-07, an increase of 8.01 per cent over the previous years profit. The adjusted audited profit after tax for the year is Rs.7,569 crore as against the audited profit of Rs.6,562 crore for 2006-07, an increase of 15.35 per cent. The company has declared an audited net sales of Rs.37,050 crore. The gross revenue crossed Rs.40,000 crore in 2007-08. The Board of Directors has recommended the highest ever dividend of 35 per cent, amounting to Rs.2,886 crore, for 2007-08. The company contributed Rs.5,689 crore to the exchequer as taxes. As on March 31 this year, the market capitalisation of the company was more than Rs.162,100 crore ($40.33 billion).
The impressive financial performance is the result of steady operational excellence. The company generated 200.86 billion units of electricity during the financial year, which is an increase of 6.46 per cent over that of the previous year. Its coal-based stations performed at the highest-ever plant load factor (PLF) of 92.34 per cent compared with 89.43 per cent in the previous year, with the Dadri plant recording a PLF of 98.2 per cent.
Hundred per cent realisation of billing for the fifth year in succession contributed significantly to improved finances. Prudent use of resources and checking avoidable wastage also helped. Energy conservation measures alone led to a saving of over Rs.49 crore during the year.
Talking about the growth of the company, set up in 1975, Chairman and Managing Director Ram Sharan Sharma, who has been with NTPC since 1980, says: It has come a long way during the three decades of its existence. It is today Indias largest power utility with an installed capacity of 29,394 MW through 15 coal-based, seven gas-based and four joint venture power stations. As on March 31, the company contributed 28.51 per cent of the total electricity generated in the country with a 19.51 per cent share of the countrys total installed capacity.
Sharma continues: From a primarily coal-based power-producing company, we are transforming into a multi-fuel-based power generating utility. As of now, coal-based power plants make up 82 per cent of the total installed capacity while the rest is accounted for by gas. We intend to bring it down to 70 per cent by 2017. The balance would be made up of gas 14 per cent, hydro 12 per cent, nuclear 3 per cent and renewables 1 per cent. By the same year, NTPC hopefully would have 25 per cent of the countrys installed capacity.
As part of its ambitious multi-pronged growth strategy, including capacity addition through greenfield projects, expansion of existing stations, joint ventures and takeovers of State electricity board stations, the company plans to add 22,430 MW capacity during the Eleventh Plan, currently on and concluding in 2012. Projects having a capacity of 16,930 MW are already under various stages of implementation and bids have been received or invited for a capacity addition of 3,760 MW. Plans are on to raise the capacity to 75,000 MW by 2017.
The company has taken a number of steps to make it an integrated power major. It has entered the coal mining business and has been allotted six blocks with a production potential of 48 million tonnes a year. The Ministry of Coal has identified two more blocks, having a production potential of 20 million tonnes a year, for 50:50 joint ventures between NTPC and Coal India Limited (CIL). The first captive mine at Pakri Barwadin is likely to start production soon.
The company has formed another joint venture, with Singareni Collieries Company limited (SCCL), to undertake coal mining in India and abroad. A memorandum of understanding (MoU) has also been signed with Rashtriya Ispat Nigam Limited (RINL), Steel Authority of India Limited (SAIL), the National Mineral Development Corporation (NMDC) and CIL for sourcing coking coal and thermal coal from abroad. Acquisition of mines and arrangements for import will provide us good fuel security. It will also facilitate blending of imported and domestic coal, resulting in improved quality, says Sharma.
Exploration activities under the New Exploration Licensing Policy (NELP-V), along with consortium partner Geopetrol as operator in Arunachal Pradesh, are also in full swing. Drilling of exploratory wells at identified prospective locations is slated for this year itself. The company is also in talks with the Oil and Natural Gas Corporation, the Indian Oil Corporation and others for participation in NELP-VII.
Pursuing its strategic intent for forward integration, NTPC has formed two subsidiaries NTPC Electric Supply Corporation Limited (NESCL) for power distribution and rural electrification activities, and NTPC Vidyut Vyapar Nigam Limited (NVVN) for power trading. NVVN transacted business of 3,325 million units (MUs) in 2007-08.
The company has also been giving greater thrust to hydropower development for a balanced portfolio for long-term sustainability; 1,920 MW capacity is at present under implementation at three different locations. It has incorporated a subsidiary, NTPC Hydro Limited (NHL), to take up small hydro projects.
The Ministry of Environment and Forests has already accorded environmental clearance to its 171 MW maiden project at Lata Tapovan. Its second venture, the 120 MW Rammam Stage III, has received environmental, defence and wildlife clearances, too.
The company is also venturing into equipment manufacture and infrastructure projects. It has signed a joint venture agreement with BHEL for the purpose. The 50:50 venture, NTPC-BHEL Power Projects Limited, will have three bases spread across the country: one for the manufacture of turbines, another for the manufacture of boilers, and the third for balance of plant works including coal-handling facilities.
NTPC has also floated a subsidiary in joint venture with the Indian Railways. Christened Bhartiya Rail Bijlee Company Limited, it will set up four units of 250 MW each of coal-based power plant at Nabinagar in Bihar. Another joint venture, with the Bihar State Electricity Board and Kanti Bijlee Utpadan Nigam Limited, has taken over the 2x110 MW Muzaffarpur Thermal Power Station.
From the mandate of a purely generating company at the time of its inception, all these steps would result in making NTPC an integrated power major with presence in the field of generation, coal mining, exploration and production (E&P), trading and distribution, says Sharma. As for increasing its global presence, apart from the activities mentioned earlier, the company would take up more consultancy work, particularly in the West Asian countries, he says.
A pioneer in undertaking clean development mechanism (CDM) projects in large thermal and hydro power projects, the company accords top priority to sustainable growth. It plans to set up a capacity of 1,000 MW through new and renewable energy sources by 2017. A notice inviting tenders for the implementation of a 100 MW wind farm has been floated. An MoU has been signed with the Asian Development Bank for the establishment of a power-generating capacity of 500 MW through renewable sources.
NTPC has also signed an MoU with the Society for Integrated Circuit Technology and Applied Research (SITAR), Bangalore, for the manufacture of LED (light-emitting diode) lamps in view of their low power consumption and long life. This is expected to have a significant impact on demand side management in the domestic segment.
According top priority to Research and Development (R&D), the company, as a matter of principle, sets aside 0.5 per cent of its profits for the purpose. It has also set up a facility for undertaking fundamental research. It allocates 0.5 per cent of its distributable profit annually for its Research and Development Fund for Sustainable Energy. While the company has created a green wealth of more than 18.37 million trees until March this year, all NTPC stations have been certified with ISO 14001 and OHSAS 18001 by reputed national and international certifying agencies.
Aware of its corporate social responsibility, the NTPC Foundation for Corporate Social Responsibility addresses social causes at the national level. It provides loans, training and medical treatment for physically challenged persons and economically weaker sections of society in a phased manner. The spirit of giving back to society has helped the company to transform the socio-economic status of the project-affected persons, and undertake community development programmes.
On the challenges ahead, Sharma says: With the economic boom, many players are entering the infrastructure sector. So remaining competitive is a major challenge. We will also have to be focussed about the management of supply chains. Fuel security is of crucial importance and it has to be ensured that there is adequate supply of coal, gas, water and renewables.
Land acquisition, Sharma says, poses a big problem. We must ensure that we get the land in time. It requires a very sound planning and implementation policy.
Availability of manpower, both executives and skilled personnel, is also critical for the future, he says. On how the company plans to tackle the problem of poaching, Sharma says: NTPC has a very sound and pro-active scheme for the employees so that they are totally involved with the organisation and develop a bond with it.
In fact, for us, our employees and investors are the two most important stakeholders, he said. As for investors, he feels we have to ensure that returns are great so that they invest in the actualisation of our vision.
The company should measure up to the expectations of the investors. The premier investment consultancy firm Keynote Capital, while choosing NTPC as one of the top picks in the power sector, says, A positive investment scenario has been built up. NTPC, with its good track record, would be a good investment opportunity. With its aggressive expansion plans, diversification in terms of power generation from thermal to other alternative energy sources would likely improve margins.
Keynote believes that the companys diversification into the transformer business will improve the returns to shareholders.
As per regulations, the utilities have 14 per cent cap on their [return on equity] ROE, but the diversification to transformer segment would help increase the ROE, it says.