Q&A: R S Sharma, CMD, NTPC

Despite several hurdles, including land acquisition and supply of equipment, India’s largest power generator, NTPC, is confident of adding 15,760 Mw in the 11th Plan (ending 2012). And, cross 75,000 Mw by 2017. In an interview with Sanjay Jog, Chairman and Managing Director R S Sharma talks of the strategy. Edited excerpts:

There has been a fall in profit for the first quarter (Q1). What are the major reasons?

Profit after tax (PAT) in Q1 of 2010-11 is Rs 1,842 crore, a fall of Rs 351 crore over last year. During this quarter, plant maintenance (cost) was 8.6 per cent, as compared to nearly 7 per cent in the same quarter last year. However,total generation in the quarter saw marginal growth over last year.The main reason for fall of profit is because other income has decreased by Rs 203 crore, due to the fall in interest rate on investible cash and redemption of bonds.

NTPC could not achieve the planned capacity addition for Q1.

We did not have a capacity addition target for Q1. However, we had set a target of adding 4,150 Mw in 2010-11. Now we are targeting to add 990 Mw in Q2, about 1,160 Mw in Q3 and 2,000 Mw in Q4 of 2010-11. All these are well under control. With this, growth in the installed capacity will be more than 13 per cent in the year.

In the 11th Plan, we have a target of adding 17,760 Mw. We have already commissioned 4,790 Mw up to July 31. We are fully prepared to meet the targets of the 11th and 12th Plans. All the 11th Plan projects are progressing on schedule, except Barh-I, North Karanpura and Loharinag Pala (with total capacity of 2,000 Mw). The issues in these projects were beyond NTPC. However, recent initiatives may lead to commissioning of these projects in the early 12th Plan.We have set up a state-of-the-art Project Management Centre (PMC) at our corporate centre, which has become the nerve centre of our capacity addition programme. The PMC is facilitating better monitoring of the milestones through its web-based system and resolution of issues through the enterprise-wide issue tracking system.

For completing the 12th Plan projects in time, we have taken some pro-active steps. We have stepped up monitoring of pre-investment activities. A pre-investment monitoring cell has been created for this and the key milestones linked in the PMC. NTPC has also adopted the LNTP (limited notice to proceed) concept for its future projects, which is likely to reduce the project completion cycle time by around four to five months. A Land Acquisition Cell has been created at the corporate centre for focus on the issue. These measures will be more useful for implementing the 12th Plan projects.

With all these in place, we are hopeful of meeting the targets and achieving our stated goal of becoming a 75,000-plus Mw company at the end of the 12th Plan, by 2017.

What are your plans for raising money in 2010-11, 2011-12 and also for the 12th Plan?

NTPC follows the balance sheet financing route. All our projects are financed with a debt:equity ratio of 70:30. Raising money has never been an issue.

The equity portion is going to be met from internal resources and the debt portion through external and domestic borrowings. We have already tied up Rs 25,000 crore of loans. Recently, our board approved a plan for external borrowings of nearly $300 million (Rs 1,395 crore).

A major hurdle in completing a power project is procurement of boiler turbine generator (BTG), as well as balance of plant (BoP). How has NTPC addressed this?

It is not only the procurement of equipment but also supply and logistics which is crucial for completion of projects. NTPC has adopted the LNTP concept for future projects, which aims at awarding of all packages within two to three months, plus or minus, of investment approval. BTG agencies would be asked to do the engineering prior to the placement of orders, which will make available technical inputs for various BoP packages and finalise the drawings, etc. This would shorten project completion time by four to five months.

In BoP, NTPC is trying to develop more vendors in coal handling plants, ash handling plants, demineralisation plants and other areas. For example, NTPC BHEL Power Projects Pvt Ltd is getting ready to manufacture BoP components.

What is happening on your joint venture with BHEL and also with Nuclear Power Corporation Ltd?

The JV company with BHEL, called NTPC BHEL Power Projects Ltd, was incorporated on August 28, 2008. Presently, land for setting up a manufacturing facility has been acquired and various studies are under progress. The manufacturing is expected to commence from 2013-14. An MoU has been signed between NTPC, BHEL and the JV company and rigorous monitoring of progress of various milestones is being done.

On the JV with Nuclear Power Corporation, the agreement has been signed between the two companies on April 27 this year. The process for incorporation of the company is on. NTPC plans to have nuclear capacity of around 2,000 Mw by 2017.

What is the update of bulk tendering for 660 Mw & 800 Mw units?

NTPC has adopted the bulk tendering route for procurement of main plant equipment, the first of its kind in the country. We floated tenders for 11 units of 660 Mw supercritical units through the bulk tendering route in October 2009. This is for nine units of NTPC and two of Damodar Valley Corporation. Due to technical reasons, fresh tenders were issued for the steam generator package in the last week of June. Techno-commercial evaluation is scheduled for the last week of August and the awarding process will be completed by January 2011. Bids for the turbine generaor package has already been opened and under evaluation.

NTPC is going for bulk tendering of nine units of 800 Mw capacity in the second phase. The proposal for this has been given to the (Union) ministry of power. The NIT is scheduled to be issued by mid-September.

Has NTPC finally succeeded in reaching a compromise with the Russian firm for the Barh project contract?

For Barh Stage-I (3x660 Mw) units, the steam generator (SG) package was awarded to TPE of Russia. NTPC received directives from the Government of India in May to go ahead with the project. We are discussion with TPE for finalisation of the plan for completion of the SG package.