New Delhi: State-owned NTPC Ltd will enter the power distribution business for the first time next month when it begins supplying electricity to an industrial park in Kochi as part of its forward integration plan.
The move will mark the emergence of NTPC as a rival to private distribution companies such as CESC Ltd, Tata Power Co. Ltd, Torrent Power Ltd and Reliance Power Ltd.
NTPC plans to leverage the merchant power capacity it is developing for the distribution business.
Leveraging capacity: R.S. Sharma of NTPC says the firm will look at more distribution opportunities. Pankaj Nangia / Bloomberg
“We are looking at managing power distribution for special economic zones and industrial parks. We have already got the licence from the Kerala Electricity Regulatory Commission,” said chairman and managing director R.S. Sharma.
“We will be looking at more distribution opportunities to leverage our planned merchant power capacity,” Sharma added.
The company’s roll-out of its power distribution strategy comes at a time when the government plans to dilute 5% of its share in NTPC through a follow-on public issue that will run from 3-5 February, bringing down the state’s stake to 84.5% and raising an expected Rs12,000 crore.
Half the shares to be offered will go to qualified institutional buyers through an auction, 15% to high networth individuals and 35% to retail investors.
NTPC’s power distribution arm, NTPC Electric Supply Co. Ltd, has entered into an equal joint venture with Kerala Industrial Infrastructure Development Corp., which will be managed by NTPC Electric Supply.
The utility plans to set up a merchant power capacity of around 6,000MW by 2017 as reported by Mint on Tuesday. Such a move would be unpopular among state governments, particularly those that depend on unallocated supply to meet their power needs. NTPC, which has a power generation capacity of 30,644MW, plans to increase its installed capacity to 75,000MW by 2012.
The utility had earlier proposed distribution networks in Kanpur in Uttar Pradesh and Mangalore in Karnataka, but neither plan has borne fruit as yet.
NTPC’s entry into distribution comes amid the Centre’s flagship power sector reform programmes increasingly falling short of target. Both the Accelerated Power Development and Reforms Project and a rural electrification programme dubbed the Rajiv Gandhi Grameen Vidyutikaran Yojana have not met their objectives.
The utility’s move is unlikely to have a significant impact on its performance.
“The idea is good, but it is left to be seen how it will be executed. Better efficiency in terms of distribution for the circle would come around with NTPC getting into the sector,” said Hitul Gutka, an analyst at Mumbai-based financial services firm India Infoline Ltd. “However, it may not have major impact on the earnings.”