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Vol. 6 | Issue 5 | Aug 2012

COVER STORY
Interview arup roy choudhury
 
‘State utilities must be financially viable’
 
NTPC is India’s largest power utility, the third largest power generation company in Asia and the tenth largest in the world, with an installed capacity of 39,174 MW through 16 coal based, 7 gas / liquid fuel and 7 Joint Venture power stations. NTPC added a record capacity of 2820 MW during the year 2011-12 surpassing its earlier best capacity addition of 2490 MW during 2010-11. With this addition the company surpassed the 11th plan target of 9220 MW by achieving total capacity addition of 9610 MW. In the first quarter of 2012-13, NTPC has already added 2,160 MW. In this interview with gfiles, NTPC Chairman and Managing Director Arup Roy Choudhury outlines his vision for the company. A firm believer in achieving team-excellence through transformational shift to proactive, positive and personalised approach, Choudhury is Chairman of Standing Conference of Public Enterprises, the apex body of over 240 Central Public Sector Enterprises.
 
The power sector has not been a favourite in recent times. What factors have actually led to the growth of NTPC?
In the case of NTPC, the company has maintained its leadership position, with steady focus on high generation, efficient project implementation and overall business excellence. The company is currently undertaking capacity addition of 16,638 MW and has signed PPAs for over 40,000 MW for sustained growth through the 12th Plan and the start of the
13th Plan.
 
Please tell us about NTPC’s financial performance in the first quarter of this fiscal?
NTPC has reported an unaudited profit after tax of Rs 2,498.67 crore as compared to Rs 2,075.78 crore in the corresponding quarter of the previous year, registering a quarter on quarter increase of 20 per cent. Its total income was Rs 16,844.89 crore as against Rs 15,167.89 crore for last year’s corresponding quarter, an increase of 11 per cent. We generated 58878 MUs of electricity from April to June 2012, an improvement of 7.83 per cent over Q1 2011-12.
 
What are the challenges you faced when you joined NTPC, especially in project implementation?
I had set for myself three broad parameters when I took up the assignment in NTPC. These were ‘efficient functioning’, ‘achievement of corporate objectives’ and ‘achieving performance parameters’. Here, the first parameter of ‘efficient functioning’ became extremely important in view of the then prevailing perception of NTPC not executing projects on time and its inability to award contracts quickly and resolve outstanding disputes. Therefore, it was very important that NTPC delivered the committed capacity addition of 2,490 MW. This looked like an impossible target at that time because NTPC’s record was of adding only an average of 1,000 MW capacity per year. The major players in this were the Station / Project General Managers, Regional Executive Directors and the main supplier, i.e. BHEL. It was necessary to make them believe that they
could do this task and nothing was impossible for Team NTPC.
 
What are the main issues that are hampering the power sector? How do you feel that these impact your operations?
NTPC will have strong growth despite challenges. The first major challenge, I feel, is the financial health of the sector. However, for sustainable growth, financial viability of distribution utilities in the states needs to improve. Due to their financial constraints, some state utilities are resorting to load-shedding rather than buying power.
 
Many State Electricity Regulatory Commissions have not been able to revise tariff. This has created large gaps in revenue and cost. The reform process has been initiated now, with several States increasing tariffs. Once the distribution segment is taken care of, the strengths of the power sector can be more effectively leveraged.
 
The second major challenge is to make available adequate amount of fuel to run power plants at optimal levels. This problem has been largely aggravated due to slow growth in domestic coal production and high volatility in international prices.
 
You have massive capex plans. How are you going to raise funds?
NTPC has a CAPEX target of Rs 20,995 crore in FY13 up from Rs 17,400 crore in FY12 and of Rs 219,613 crore in the 12th Plan.
 
NTPC has a strong balance sheet which is being leveraged by it to mobilise resources at competitive rates. Strong financial ratios have ensured that the cost of borrowing has been competitive for the year 2010-11 and the first quarter of 2011-12. Our debt-equity ratio is 0.64 which gives us ample scope to raise more debt.
 
The robust financials of NTPC have led to strong cash flows. The State Bank of India has extended its largest ever loan to any company in India or abroad by signing a loan agreement of Rs 10,000 crore with NTPC in July 2011. NTPC raised $500 million from the international bond market last year, with its issue getting oversubscribed by 5.5 times. This strongly underlines the confidence of the investor community in the robust business fundamentals of NTPC.
 
What kind of training and development programmes are being initiated to improve business and profit per employee?
Our HR policies focus on enabling NTPC to emerge as one of the largest and best power companies in the world. Our HR policies and practices have a sharp focus on productivity improvement. At the beginning of our journey, we operated with PLF of about 80 per cent and now we have graduated to above 90 per cent at all locations. This has been possible through various innovative skill development practices in operations and maintenance.
 
One of the examples of the efficacy of NTPC training initiatives is the excellent results of power stations assessed by the North American Electric Reliability Corporation, which undertakes utilities’ benchmarking. Performance comparison of 500 MW and 200/210 MW units of NTPC with international units on various parameters based on the data for the year 2009-10 reveals that NTPC units have performed better than their global peers.
 
The robust financials have led to good cash flows and NTPC is
leveraging its strong balance sheet to raise funds to meet its capex
target of Rs 21,000 crore
In terms of employee productivity, the company has registered impressive gains as reflected in the fact that the value added per employee has increased by 75 per cent, the profit per employee has increased by 32 per cent and the sales per employee has gone up by 85 per cent in the last five years.
 
What green initiatives are being taken by the company for meeting green concerns?
NTPC has adopted super critical technology and has ramped up the conversion efficiency of its coal-based plants from nearly 36 per cent to about 40 per cent and by 2020 it will be achieving nearly 45 per cent efficiency. Every 1 per cent increase in efficiency leads to 2.5 per cent cut in carbon reduction. NTPC is working with BHEL and IGCAR for development of Advanced Ultra Super Critical Technology, which is at the laboratory stage in India and other industrialised countries. NTPC hopes that this collaborative effort gives the Indian power sector a head start through efficiency driven gains on such a large scale on the environmental front.
 
NTPC has done massive afforestation and has developed a carbon sink of nearly 2 crore trees.According to the corporate plan of NTPC, as much as 28 per cent of the installed generation capacity of 128,000 MW by the year 2032 will be based on non-fossil sources. This will consist of 11 per cent nuclear, 8 per cent hydro, 6 per cent wind and 3 per cent solar. NTPC is committed to introducing and expanding the use of renewable energy and plans to add 1000 MW capacity addition through Renewable Energy sources by 2017.
 
The company plans to participate in the national objective of developing and promoting clean energy technologies through the National Clean Energy Fund (NCEF). It is planning to begin with three projects, including one solar thermal hybrid plant, with the help of the fund.
 
During the year 2010-11, the Company formed a joint venture company Anushakti Vidhyut Nigam Ltd with 51 per cent stake of Nuclear Power Corporation of India Ltd. Site selection is in progress for a 2X700 MW project to be developed by the JV. NTPC’s nuclear power engineers are already being trained by NPCIL.
 
NTPC’s trading arm, NTPC Vidyut Vyapar Nigam Ltd. is the nodal agency for implementation of the first stage of Jawahar Lal Nehru National Solar Mission, one of the eight national missions of the Government of India under the National Action Plan for Climate Change. g

 

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