On September 20, when Chairman and Managing Director of NTPC Gurdeep Singh addressed the company’s shareholders, he said that on September 9 the actual energy demand met in the country was at an all-time high -- 3,539 MU and NTPC (along with group entities) contributed 866 MU. “Thus, green shoots are visible as far as upswing in power demand goes and this is in line with our long held expectations of growth,” he had informed the shareholders. The challenge before Singh is not generation, but to see that the electricity reaches the end consumers – both industrial as well as individual – 24x7 and at right price. But, Singh cannot do this alone. In conversation with BusinessLine, Singh shared his views on real cost of electricity, health of the DISCOMs, and NTPC’s growth prospect. Excerpts:
Today India’s power sector suffers more from lack of infrastructure and demand issues than the supply problems experienced earlier. Has UDAY (Ujwal Discom Assurance Yojna) addressed the existing problem?
Our first quarter results are an answer. There was a 10 per cent increase in our power supplies. Put together with our subsidiaries, it was nearly 12 per cent. This is partly due to UDAY. The health of the DISCOMs seems to be relatively better than before and they have been able to purchase more power and paying for it. So, UDAY is showing some results.
Some States have not announced tariff orders. Isn’t it distorting the market?
The regulators have to find whether the real cost of electricity is being recovered from the customers and what can be the different kind of tariffs. Some states have finalised the tariff orders, some haven’t, and this could be due to several reasons.
But, one thing is clear that tariff for industrial sector needs to come down, otherwise DISCOMs will not come out of the stress. Industries need to be supplied electricity at some kind of competitive rates.
Do we need differential tariffs?
The problem is that the peak industrial tariff has gone very high. However, this is a subject which needs detailed discussion and needs to be studied -- how electricity sector is treated by the individual States.
Are solar tariffs which are around ₹4.5-5/unit suppressed ? Can projects be sustained at this price?
I don’t think it is suppressed. Everyone has to see what kind of returns they expect. Many of the private sector players are trying their own financial engineering. I think any tariff around ₹5 a unit is sustainable.
Our combined generation has an average tariff of around ₹3.04 a unit. But if we put in a new thermal power plant, the capital cost itself is coming at around ₹2-2.5 a unit. Fuel cost is a function of the distance from the mine.
Talking about new projects, what is next on NTPC’s radar?
Already 24,000 MW of capacity is under construction. Several projects are close to commissioning, several orders are being placed. What we are looking for is commissioning and ordering 2,000-2,500 MW annually for the next few years.
This is on the coal side. Solar and wind is separate.
The renewable side we are still drawing up the plans. The objective is 10,000 MW of renewable capacity by 2022.
We need to revisit our business plan which will be revealed very soon. The focus is on the renewable side. Along with the coal-based generation, we are finally investing into renewables and mainly solar. That is a big change.
Is it a government mandate to get into renewables or is it your own strategy? If the portfolio is divided will your mainstay be thermal or renewable will get higher weightage?
At the end, we are a power generation company. We were predominantly coal-based, but now our portfolio will see a significant jump in the renewable side. Only last year, we commissioned our hydro plant. We are also commissioning two more hydro plants, so our portfolio is going to undergo a lot of diversification.
We are lacking in wind so far. But very soon, we should be there. Perhaps, this will happen over the next year and half. In the first tranche, we are looking for 100 MW, but the overall target is around 1,000 MW for wind.
Will your power trading business get a booster?
The margin in the power trading business is a little squeezed, so the only thing to play on is the volumes. In the recent past, we started trading our URS (unrequisitioned) power, in addition to whatever we were trading already.
Most of our capacities are contracted, but some remains unrequisitioned.
This is traded. The other thing is the cross border trading. We are selling a lot of power through NVVNL (NTPC Vidyut Vitaran Nigam Ltd) to Bangladesh and Nepal.
The point is how much risk we can take because trading is predominantly dependent on the working capital. We are trying to balance out the risk. We are well equipped right now. Total trading on the exchanges is still 3 per cent. We are stable in this segment.
Where does upgradation to super-critical units stand? What is the strategy for the existing older plants? Are you still open to participating in UMPPs bids?
All the new plants are going to be super-critical.
Existing ones we are still assessing several things. One decision that we have to make soon is whether to acquire new land or expand our existing facilities and go in for brownfield expansion.
I am quite clear that we will be putting our energy towards brownfield projects expect those which have already started or those projects where land has already been acquired.
As regards UMPP, we will see if it makes commercial sense. As and when it comes, we will participate. What I am hearing is that it would come very soon.
How much money you want to raise from the market?
We are executing 24,000 MW of projects entailing ₹1.6 lakh crore.
We got shareholder approval to raise ₹15,000 crore this year. A lot of investment has already been done and every year we would need money.
This year capital expenditure requirement is ₹30,000 crore. Internal accruals will be ₹9,000 crore, but we need ₹21,000 crore in debt as well. So if we go for growth, we need to raise debt as well.