The country’s largest power generating company, NTPC Ltd, did not surprise the markets. With a paucity of fuel and the deplorable plight of state electricity boards (SEBs) taking centre stage in the last two quarters, the Street did not have great expectations from this power utility for the June quarter. The company’s total power generated was down about 3%. With better realizations per unit, revenue was about 9% higher.
Of course, the company’s results reflect a 12% increase in fuel cost from the year-ago period, perhaps due to rising coal prices. But the bigger concern is the pathetic plant load factor (PLF) reported during the June quarter.
NTPC’s coal-based units’ PLF at 86% was lower than 89% a year ago and 94% in the preceding March quarter. Analysts’ worry is that such low performance during the months of peak summer season is an opportunity lost for the company to enhance returns. The performance of its gas-based plants was worse off, with PLF of about 64%, which was lower than 88% a year ago and about 72% in the March quarter.
Although analysts are awaiting clarity from the management in a conference call scheduled next week, most of them feel that backing down of power by SEBs is the main reason for PLFs tripping.
Meanwhile, media reports announced a maintenance shutdown of 2,000 megawatts, which could further hit performance in the current quarter. Low PLFs will imply lower return on equity, as the benefits earned by the company for operating above a specified PLF, as per norms, will diminish.
NTPC is expected to add about 4 gigawatts of capacity during fiscal 2012. But how this translates into better returns for the investor depends again on fuel availability. The logistics of importing coal could add to the woes of shortage in domestic markets.
However, higher-than-expected other income for the quarter at Rs 644 crore boosted net profit, which was 12.7% higher than that during the year-ago period.
Shares of NTPC, which have toed the line of the benchmark Sensex of BSE so far this year, were in a state of inertia, given the rather subdued performance and a backdrop of concerns that haunt the sector. Unless these concerns are addressed, valuations and investor sentiment will continue to be tepid.
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