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Spotlight | February 2013

NTPC Moves to Offload Govt Holding

The country's largest power producer NTPC will soon hit the counter to offload government holding by 9.5 per cent through an auction as per the government plan for divesting stakes in public enterprises. The government, which owns 84.5 per cent of NTPC, aims to raise around
Rs 13,000 crore. However, NTPC will not raise any fresh equity through this offer.

NTPC has already picked up a group of investment bankers including Citigroup, Deutsche Bank, Goldman Sachs, Kotak Mahindra Capital, Morgan Stanley, and SBI Capital Markets to run the share sale. The government, which aims to raise Rs 30,000 crore through diluting its holding in companies, has also started overseas road shows to lure foreign investors.  "With strong fundamentals and growth prospects for the company in the back drop of enormous demand for power in the country, we expect NTPC to draw enormous response from domestic as well as overseas investors," said a senior research analyst from Mumbai based broking firm.

Last month, the government returned three coal blocks to NTPC which were taken back due to delay in developmental work. The three coal blocks - Chatti-Bariatu, Kerandari and Chatti-Bariatu (South), all in Jharkhand - were forfeited in 2011. The move is being observed to be aimed at boosting the valuation of the company for the share sale. 

NTPC reported a nearly 22% jump in its net profit at about Rs2,597 crore in the third quarter ended December, 2012 as against Rs2,130 crore in the same period a year ago.  
 
Growth Dynamics  
NTPC 2,820 MW commissioned in 2011-12, the highest ever in a single year, surpassing the previous year's capacity addition record of  2,490 MW. During 11th Plan period it has added 9,610 MW, exceeding the Plan target. The company has recorded highest ever capex of Rs  15,994 crore in 2011-12 with group capex of  Rs 19,973 crore and added 2,160 MW in the first quarter of 2012-13. This also included three 660 MW Super Critical Units commissioned and declared commercial at Sipat, the higher efficiency reduces CO2 emissions substantially.

On the operational front NTPC is operating one of the largest fleets in the world consisting of 120 units on commercial operation with high levels of capacity utilization and reliability through the use of latest technologies and best practices. The state run power generator shares 27.4 per cent with regard to the total power generated in India.  
 
Company outlook for the economy and the sector

Even amid the relatively negative sentiments prevailing in the global and domestic economies, the Indian economy remains the highest growth potential large economy' in the world in the eyes of experts. India's overall growth story remains intact for the long run. Being primarily driven by domestic demand and with a very large segment of its huge population having economic aspirations and dynamism, the Indian economy stands on firm ground. 

This translates into a strong growth outlook for the power sector. It is envisaged that for 8 per cent GDP growth, India will need a power generation capacity of 778 GW by 2032. The target growth of 8.2 per cent over the Twelfth Plan period for "strong inclusive growth" envisaged by the Government of India would require  commensurate growth in the power sector. Power, being one of the prime movers of economic growth, the Government has accorded it high priority.
 
Challenges Ahead

Though the company is optimistic about the growth potential in the sector, it perceives that persisting challenges may hinder the capacity addition in the sector. Other challenges include an inadequate fuel supply, financial status of the state utilities, tariff revisions and distribution reforms.  In order to overcome these challenges, the NTPC has taken several initiatives like bulk tendering, pre qualifications of vendors, direct import of coal and development of own mines, to step up capacity addition ensure fuel supply. Bulk tendering has  also helped in enhancing the capability of equipment manufacturing in the country through the induction of leading global manufacturers to set up manufacturing units in India along with their domestic JV partners.
 
Twelfth Plan Target

NTPC plans to add 14,038 MW capacity during the Twelfth Plan period and maintain its position as the largest power generator in the country. The company claims that it has received all the clearances and approvals and had tied up for fuel supply to the proposed capacities. It has already tied up domestic loans of  Rs  57,229 crore, out of which about Rs 17,000 crore is undrawn. Further, the company has domestic bond raising capacity is more than Rs 50,000 crore.
 
Global Reach
In order to expand the  boundaries of its operations, NTPC has formed a joint venture company Trincomalee Power Company Ltd­  with Ceylon Electricity Board for setting up a 2x250 MW coal based power project in Sri Lanka.

Apart from this, the company has entered into a joint venture agreement with Bangladesh Power Development Board for setting up a 2X660 MW power plant at Khulna there and the process of incorporation of the JV Company is under way.NTPC's wholly owned subsidiary 'NVVN' has been designated as the nodal agency for 'cross-border-power-trading' with Bhutan and Bangladesh. Sustainable power development towards making the planet greener and people happier.
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