With the Union power ministry envisaging an ambitious capacity addition programme under the 11th and 12th Plan to overcome the country?s growing power shortage, India?s largest generator NTPC is set to gain in a big way. The company is expected to increase its market share from 19% to 21% by 2014. Meanwhile, the central utility is trying to secure fuel supplies for its power plants by accessing coal deposits abroad. Besides, the company is also diversifying into non-conventional energy areas like hydro, nuclear and renewable sources. All these add up to significant upsides for the company. However, the current trading price of the company?s stock does not reflect these upsides, says Macquarie Equities Research in its latest update.
The Central Electricity Regulatory Commission (CERC) has raised the return on equity (RoE) by 1.5% to support the government?s policy to attract enhanced power generation?a move that will help NTPC boost its profitability.
The company is also expected to gain from its backward integration moves to secure fuel supplies for its power plants. The company is mining coal and exploring oil and gas blocks. Apart from tapping opportunities in India, NPTPC is also hunting for acquisition of oil and gas assets abroad.
Meanwhile, the thermal power generator is also trying to reduce its dependence on fossil fuels by diversifying into non-conventional energy areas like hydro, nuclear and generation from renewable sources such as wind, solar, geo-thermal and biomass. That will also help the company to reduce its fast-expanding carbon footprint.
As of now, NTPC has an installed power generation capacity of 30,644 mw, about 82% of which is fired by coal and the rest by gas. The company has no hydropower generation capacity. But it has taken up three hydropower projects of about 2,000-mw capacity for implementation under the Eleventh plan, even as it is adding about 2,500-mw capacity based on natural gas.
The utility expects to reduce the share of coal-fired power generation in its capacity mix to 80% from the existing 82%. By 2017, the company expects to bring down the share of coal-fired generation capacity to 70%. It has targeted to raise the hydropower share to 12% by adding 9,000-mw capacity during the same period. Besides, it has also envisaged adding 2,000 mw in nuclear power generation and 1,000-mw capacity from renewable sources like wind, solar and geothermal.
NTPC is not only adding capacity but also running its existing power plants efficiently. The plant load factor (PLF) of NTPC?s power plants worked out to 91.1% in 2008-09, compared with the All-India average of 77.2%. What is more, the company achieved this without compromising on the scheduled maintenance of its power plants.
India?s electricity demand has outpaced supply in recent years. Serious constraints in getting timely delivery of equipment from suppliers often lead to delays in the commissioning schedule of power projects. That, in turn, adversely affects profitability of the projects. To overcome equipment shortage for its power plants, NTPC has decided to develop manufacturing facility for power equipment in collaboration with Bhel.
The traded price of the company?s share was Rs 210 on November 27. However, Macquarie Equities Research says the stock is undervalued and has set a 12-month target of Rs 258. ?The Indian market has performed strongly year-to-date and, should there be a correction, we believe that NTPC could outperform on a relative basis.?