Jefferies says impact on NTPC likely after FY19

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Published: December 20, 2016 6:20:59 AM

NTPC’s chequered execution history in past years has led to project delivery v/s announced plans driving re-rating. We visited its Pakri-Barwadih mines & were happy to see coal production has begun.

Experience here should see NTPC management picking up execution pace in other projects also. Currently, any returns from mining project investments in Pakri-Barwadih of R18 billion have not been factored in our earnings, with material impact likely FY19E onwards. (Twitter)Experience here should see NTPC management picking up execution pace in other projects also. Currently, any returns from mining project investments in Pakri-Barwadih of R18 billion have not been factored in our earnings, with material impact likely FY19E onwards. (Twitter)

NTPC’s chequered execution history in past years has led to project delivery v/s announced plans driving re-rating. We visited its Pakri-Barwadih mines & were happy to see coal production has begun.

Experience here should see NTPC management picking up execution pace in other projects also. Currently, any returns from mining project investments in Pakri-Barwadih of R18 billion have not been factored in our earnings, with material impact likely FY19E onwards.

The mine is divided into three regions: 1) West Quarry, 2) East Quarry, and 3) North West Quarry. Progress has picked up sharply since Mine Developer and Operator (MDO) contractor Thriveni-Sainik JV has begun work in 2015 in the West Quarry.

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NTPC from its 10 allocated coal mines has been discussing overall 105-110 mn tpa annual mining capacity. Strip ratio at Pakri-Barwadih (reserves 1.4 bnt) is high at 1:4.16 leading to a more gradual ramp-up in production over 3-5 years. Expected coal is G10 quality at 4100-4600 kcal. Chatti-Bariatu mine (0.5 bnt reserves) which is in the vicinity has a good strip ratio of 1:1, with management expecting a faster ramp-up and execution there post its current experience.

Management efforts are focused on raising profitability from internal efficiencies and plant-specific PLF improvements. Confidence remains in adding 3-5 GW in FY17E vs our expectation of 2 GW for standalone and 2.7 GW for the group.

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