1. NTPC looking for vertical integration

NTPC looking for vertical integration

Chairman says company is upbeat about UMPP bidding and will do a better job than the rest

By: | Published: February 11, 2015 12:06 AM

The biggest power producer of the country, NTPC, is looking to venture into coal mining and electricity distribution to achieve vertical integration of the entire power business so that its plants do not remain idle.

The company will put into motion short-term plans in the next fiscal and long-term measures in the coming five-ten to ensure NTPC emerges as a complete power company, rather than a pure thermal power producer as now.

“NTPC must have a presence in all the power sector segments, beginning with coal mining to arranging fuel down the value chain to distribution of electricity”, Arup Roy Choudhury, chairman and managing director of NTPC, told FE.

The company has faced issues of lack of quality coal supply from CIL and under-consumption by the distribution sector, which often resorts to load-shedding to avoid buying power from generating units despite availability of power. NTPC’s plan of vertical integration is aimed at hedging some of these risks.

The company also said that while scrapping the bids for ultra mega power plants (UMPPs) for Odhisha and Tamil Nadu was disheartening, the company was geared up to present a challenging bid when the fresh bidding process resumes.

In January, the government had announced that it was abandoning the bidding process for the two UMPPs after the private power producers withdrew, citing difficulty in securing finances for the projects because of certain bidding clauses. NTPC and NHPC remained the sole contenders for the UMPPs, prompting the government to constitute a committee to review the bidding norms and start the entire process afresh.

“With 40 years of experience in setting up and operating the power plants, we feel that our bid for UMPPs will not only be competitive but would be at the most realistic rate at which electricity can be generated in the country”, Roy Choudhury said.

Of the four UMPPs that were bid out by the government, NTPC had failed to bag even one. However, the two operational UMPPs—Mundra and Sasan—are struggling to cover their cost as extremely low tariff promised in their bids have proved to be insufficient to offset the rising input cost due to domestic and global price changes.

The other two UMPPs have struggled to even take off. Experts attribute this situation to these companies’ inability to factor in various issues related to power generation while bidding, which resulted in extremely low but unsustainable tariffs.

“NTPC had quoted the rates of R2.12/unit and 2.39/units respectively for Sasan in 2007 and Tilaiya in 2009. These bids were criticised but, in the long run, everybody acknowledged that those were the realistic rates and had NTPC been awarded the contract, the projects would have by now been fully generating affordable electricity,” Roy Choudhury said.

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