Falling PLFs a potential threat to NTPC’s returns: SBICAP Securities

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New Delhi | Published: June 22, 2019 2:01:57 AM

Analysts have attributed the fall in NTPC’s utilisation levels to renewable/hydro plants and cheap spot power displacing high-cost NTPC stations.

NTPC coal PLFs have steadily come down over the years, from 85% in FY12 to 77% in FY19.

Even as state-owned power generator NTPC gained from improved coal supply to its power plants in the pre-election season, its dwindling utilisation levels can pose a threat to its returns going forward, analysts said.

NTPC’s coal plant load factor (PLF) went down 720 basis points year-on-year (y-o-y) in May even as electricity produced by conventional power plants across the country recorded a y-o-y rise of 5.1%, thanks to a surge in demand stemming from poll-related activities in the scorching summer.

“Although improving coal supply and the resultant increase in plant availability factor (PAF), is indeed good news for NTPC, dwindling PLF despite the rise in power demand is a concern,” analysts at SBICAP securities said.

Lower PLFs can potentially hurt efficiency parameters like station heat rate and auxiliary energy consumption, which play a role in determining the level of returns for the regulated entity. While lower cost pithead plants continue to record high PLFs, some large non-pithead stations such as Kudgi, Solapur, Dadri, and Mauda continue to report utilisation levels below 60%. NTPC coal PLFs have steadily come down over the years, from 85% in FY12 to 77% in FY19.

Analysts have attributed the fall in NTPC’s utilisation levels to renewable/hydro plants and cheap spot power displacing high-cost NTPC stations. Discoms seemingly chose to cater to the higher power demand from the recently auctioned renewable energy units where tariffs are in the range between Rs 2.43-3.00/unit, lower than the fuel charge of many NTPC stations. Furthermore, with improved coal supply situation, spot prices in the day-ahead market have remained attractive at below Rs 4/unit.

NTPC’s fixed cost under-recoveries came down 43% annually in FY19 to Rs 800 crore as its average PAF improved 146 basis points y-o-y to 87.3% on higher coal receipt. Fixed cost represents pre-determined expenditure components, including debt service obligation and risk-free returns. Under-recoveries due to coal shortage in FY19 was Rs 250 crore, down 69%, as it received more fuel from Coal India and increased production from its own captive mines.

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