Poor demand, fuel shortage cost NTPC Rs 6,600 crore

Subhash Narayan Posted online: Wednesday, Dec 11, 2013 at 0000 hrs
New Delhi : A slowdown in power demand by state utilities and fuel shortages have begun to hurt the country's largest power producer, NTPC, with the firm claiming to have foregone revenues to the tune of Rs 6,600 crore in the April-November period of the current fiscal on account of reduced generation.

The company reported a loss of generation of 22 billion units (BU) up to November-end in the current financial year, a 69% jump over a slippage of 13 BU in the corresponding period last fiscal. In fact, the loss of generation stood much higher in April-October at 32.5 BU, but more than 100% capacity use in November has reduced the loss.

A slippage (loss of generation) is the difference between the optimum level of capacity utilisation and actual generation.

Despite high levels of generation loss, NTPC's financials are protected to an extent as the company has paid the fixed charges for optimum capacity, irrespective of whether the discoms buy power (the CERC draft guidelines unveiled on Monday, if implemented, could deprive the company of this facility).

In April-November, out of 22 BU of generation loss, 14 BU is due to slow demand from discoms but the remaining 8 BU is due to lack of fuel for which the company would not even be paid capacity charges as it also affects availability factor of plants.

According to a Kotak report, NTPC's generation loss has touched 26% net commercial generation in the April-October this fiscal, a sharp rise over a loss of 11% in FY12 and 14% in FY13. The generation loss has resulted in a fall in PLFs to 77% in H1FY14. However, return profile of projects has depended more on plant availability factor (PAF), which has seen an improvement—86% in H1FY14 against 84% in H1FY13.

With NTPC realising average tariff of Rs 3.09 a unit of electricity, the generation loss in April-November amounts to “revenue foregone” of Rs 6,600 crore, without considering other variable factors, a company official said.

“Up to now, our generation loss has been huge as state electricity boards are not buying power,” NTPC chairman and MD Arup Roy Choudhury said.

In an energy starved country, where peak shortage is over 10%, generation loss due to the states' refusal to buy power or fuel shortages is paradox.

Faced with financial problems, state utilities often do not buy power and resort to load-shedding rather than ensuring regular supply of electricity to consumers.

Of course, NTPC does not suffer any real loss in actual terms due to generation slippages. But it has all the wherewithal to produce more had the demand been there and optimum capacity use would have positively impacted its bottom line.

The generation loss in current fiscal up to November has meant that 5,000 MW equivalent of NTPC capacity has remained unused.

The company, which on an average generates about 250 BU of electricity annually, produced 148 BU in the current fiscal year (up to November 29) against generation of 149 BU in the corresponding period of last fiscal.

Lower demand and rise in imported fuel cost has already dented NTPC's profitability with the company reporting a year-on-year 21% drop in net profit to Rs 2,493 crore in the July-September quarter of current fiscal. Net revenue (from electricity sales) during the period also increased marginally by 0.94% to Rs 16,272 crore from Rs 16,120 crore in the year-ago period. Profit before interest and tax from generation activities dipped a little over 12% to Rs 3,570 crore during the quarter, indicating that Plant Availability Factor (PAF) took a hit during the quarter.

UP and Tamil Nadu have been the main culprits when it comes to not meeting electricity demand due to poor financial condition of their respective state electricity boards.

While NTPC power is under the PPA route where tariffs are lower, demand for electricity has fallen in a few states as good monsoon has stepped up generation from their hydro projects and also good weather conditions have impacted demand.