State-run NTPC Ltd has dropped its $1 billion (Rs4,613 crore) acquisition plans for a South African coal mining firm as it would have required another $500 million to set up washeries to process the fuel’s high sulphur content.
“We have dropped the plans due to high sulphur in the coal,” chairman and managing director R.S. Sharma said.
While NTPC’s plants are facing an acute coal shortage, the utility has not succeeded in any of its overseas plans to source either coal or natural gas even as it has cash reserves of Rs44,393 crore.
Mint had reported about Asia’s largest power utility’s acquisition plans on 15 September and concerns about sulphur content on 5 October.
“We are now looking at other opportunities,” Sharma said.
Fresh coal supplies are critical for NTPC as the fuel powers at least 80% of its installed capacity of 31,134MW. With around 67% of total power generation currently based on coal, the power sector is the largest consumer, absorbing nearly 78% of India’s coal production.
Some analysts said a growing concern for the environment may have also led NTPC to drop its plans. As the largest power producer in the country, NTPC is the biggest consumer of coal in India, but it will need to balance the country’s hunger for the fuel with environmental concerns.
The Center for Global Development, a policy and research organization based in Washington, DC, had identified NTPC in 2008 as the third-largest polluter among the world’s power producers.
“Given the current concern on climate change, NTPC could have taken this decision. Even as the utility is also developing its own captive mines, its coal requirements are going to increase given its capacity addition plans,” said Rupesh Sankhe, an equity research analyst at Angel Broking Ltd.
In a related development, the utility plans to finalize its coal import policy by this month-end. As part of the policy, NTPC plans to directly import the coal it needs.
“We are discussing the long-term coal import policy. We plan to take it up for board’s approval shortly,” Sharma said. “This will form the basis of our coal imports.”
NTPC has postponed the 4 million tonnes (mt) imported coal tender till its coal import policy is finalized. The utility could reduce its coal import bill through direct imports that do not involve paying a commission to the trader.
This could mean proportionately lower power generation costs and, consequently, lower tariffs. NTPC has also started receiving coal with the execution of the controversial 12.5 mt coal import order by state-owned trader MMTC Ltd.
The utility requires 122.94 million tonnes per annum (mtpa) of coal and it expects this to grow further as a substantial portion of the capacity it is adding will be based on coal. The firm plans to have an installed capacity of 75,000MW by 2017.
NTPC returned a net profit of Rs7,827.4 crore on revenue of Rs42,182.4 crore in 2008-09.