NTPC’s overseas coal and gas supply plans flounder

NTPC’s overseas coal and gas supply plans flounder
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First Published: Sun, May 04 2008. 11 11 PM IST
Updated: Sun, May 04 2008. 11 11 PM IST
New Delhi: Plans of NTPC Ltd, India’s largest power generation company, to ramp up its capacity could be jeopardized as the firm has not been able to secure gas and coal blocks from abroad, according to a senior company executive who blamed red tape.
To meet additional requirements, NTPC plans to float a global tender for coal to double its coal imports to 5 million tonnes (mt) per annum in the current year. But the company has not been able to move swiftly.
“We do not see the deals happening now due to our public sector unit way of approaching these deals,” said the NTPC executive, who did not wish to be identified because of the sensitive nature of the issue.
“The delays and over insistence on due diligence have done us in. In a competitive international scenario we have to take decisions fast. That is not happening,” he added.
Meanwhile, NTPC’s competitors such as Tata Power Co. Ltd, Reliance Power Ltd and ETA Star India Projects Pvt. Ltd have picked equity stakes in Indonesian coal blocks.
Coal is a critical requirement for NTPC, which aims to become an integrated energy utility, as more than 80% of its installed capacity of 29,144MW is coal-based and a substantial portion of its planned new capacity will be coal-based as well. The company currently uses 122.94mt of coal a year.
NTPC plans to increase its power generation capacity by 22,596MW to 50,000MW by 2012. Of this, 15,180MW will be through coal-based power generation, 4,550MW through gas-based generation and the balance from hydro-power.
“Accountability and checks and balance systems are more in a government set-up as compared to that in the private sector. This system has its pros and cons, with late decision making being one of the negative points,” said K. Ramanathan, distinguished fellow at The Energy and Resources Institute.
“However, the government should also help NTPC in assessing the geopolitical risks and facilitating its efforts in securing equity stakes in coal and gas blocks overseas,” he said. Supply constraints have also hit the company hard.
NTPC, which has cash reserves of around Rs12,000 crore, is seeking supplies for its seven power plants fuelled by gas or liquid fuel with a total capacity of 3,955MW, and for its 740MW gas-based plant. These are now operating at lower capacity utilization and efficiency levels because of fuel unavailability.
The company’s total gas requirement is 17 million cu. m per day (mcmd), but it can access only 10.5 mcmd.
As a result, NTPC is forced to use alternative fuel naphtha to run its power plants as it has not been able to buy enough liquefied natural gas, or LNG.
“Of our current supplies, only around 1 mcmd is in the spot market with the balance being APM (administered price mechanism) gas. With gas prices in the spot market at $21 (Rs854.7) per million British thermal units, we cannot buy it,” the NTPC executive mentioned earlier said.
“Even if we are willing to pay that high a price, there is simply no gas available...the tenders that we have floated have seen no participation from LNG suppliers,” he added.
NTPC could find gas and coal prices increasing further with the crude prices reaching the $120 a barrel level. Crude prices have an impact on LNG and coal prices.
The company has also been trying to secure a contract for gas supply of 3mt a year in lieu of setting up a 700MW gas-based power plant and a 500MW coal-based plant in Nigeria, but the deal is still uncertain because of a change in government in Nigeria.
NTPC is also trying to get equity stakes in gas blocks in Australia and Yemen.
The company had a net profit of Rs7,129.30 crore on revenues of Rs37,004.60 crore in 2007-08.
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First Published: Sun, May 04 2008. 11 11 PM IST