The Nuclear Deal Is A Welcome Step

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What is your current generation capacity and what will it be in the coming 2-3 years?
The current generating capacity of NTPC is 29,894 MW. We have another 16,180 MW capacity under construction and 4,600 MW capacities likely to be ordered shortly. By 2012 (end of the 11th Plan), we intend to have 50,000 MW of installed capacity, including NTPC's first hydro-project and a small amount of renewable capacity. We also expect around 12 MTPA of coal production from our coal mines. By 2012, we expect to commence work on our nuclear project as well.

We have embarked upon diversification initiatives to capitalise new growth opportunities in the sector for leveraging our strength and for consolidating our position as the lead player in the Indian power sector. The diversified portfolio includes initiatives for backward (fuel, manufacturing) and forward integration (power trading and distribution) as well as diversifying the fuel mix in our generation portfolio.

The company's operating income has crossed Rs 37,000 crore in 2007-08, well ahead of Rs 32,631 crore in 2006-07. Are you satisfied with this performance? What is your future expectation?
NTPC has crossed the Rs 40 billion mark of total income in 2007-08. Our financial numbers are in line with our expectations and growth plans.

Recently NTPC has entered into a joint venture agreement with NHPC Ltd, Power Finance Corporation Ltd. And Tata Consultancy Services Ltd to set up and operate a Power Exchange at the national level. Can you elaborate?
NTPC Ltd, NHPC Ltd, Power Finance Corporation Ltd and Tata Consultancy Services signed a joint venture agreement for incorporation of a JV company for setting up and operating a power exchange at the national level. The exchange shall provide a neutral and transparent electronic platform for trading of power on 'day ahead' basis and ensure clearing of all trades in a transparent, fair and open manner with access to all players in the power markets.

What are the capex plans of NTPC for the next five years?
During the financial year 2007-08, NTPC's capital expenditure was Rs 86 billion which was the highest in any year since inception. In line with our growth plans, Rs 1,600 billion of capex is envisaged in the 11th Plan.[PAGE BREAK]

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In the power sector these days, ultra mega power project (UMPP) is the buzz word. Now that the bidding of three projects is over and NTPC didn't get any of them, what is your future plan for the forthcoming 6 UMPP bidding?
We are equally aggressive on UMPP and we mean business. That is the reason we are now more prepared to aggressively bid for the future six projects. Another thing is that as we want to increase our capacity to 50,000 MW by 2012, we are equally serious on our expansion plans for other projects and are therefore not considering UMPP as the ultimate thing to be achieved. It is, after all, just like any other project of 4,000 MW and we have many such in our kitty.

Recently the Finance Ministry suggested that GAIL and NTPC should infuse an additional equity of Rs 475 crore each in the 2150 MW Dabhol power project. What is your view considering that the estimates to revive the projects exceeded the earlier estimates? What should be the total investment of the company in the project?
The current estimated completion cost is Rs 2,364 crore as against the original estimated completion cost of Rs 870 crore. With an increase in completion costs, the project cost exceeds Rs 10,038 crore. The additional equity infusion of Rs 1,200 crore (Rs 475 crore each by NTPC and GAIL and balance by the government of Maharashtra) is for completion of the LNG terminal. The total investment of the company will be Rs 975 crore after infusion of additional equity of Rs 475 crore.

Many realty owners want NTPC to help them set up captive power plant for their SEZs. How do you see this as a business opportunity? Are you aggressive on this  count?
NESCL, a subsidiary of NTPC Ltd, has signed a MoU with three leading SEZ/real estate developers i.e. Unitech, Ansals and Parsvnath for providing captive power to the consumers within the SEZ/integrated mega townships developed by them. The company has signed a JV agreement with Kerala Industrial Infrastructure Development (KINFRA) for taking up retail electricity distribution in parks and SEZs developed by them.

The nuclear deal is now through and it has been mooted that this will change the power sector drastically. What is your view about it?
The nuclear deal is a welcome step towards attaining the energy security of the country. It shall also give us access to latest technologies. We look forward to the deal getting operationalised at the earliest so that the nuclear power development can be fast-tracked.[PAGE BREAK]

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As NTPC is the premier power generation company of the country, what contribution will the company make in nuclear power generation? Do you have any plans?
We certainly do have ambitious plans. We will be a major contributor towards development of nuclear energy and that is the reason why we recently established a nuclear cell in the company to train our employees for nuclear technology. Also, NTPC had taken the mandate from its shareholders last year for foray into the nuclear sector. As per the company's corporate plan, we intend to have 2,000 MW of nuclear power in our portfolio by the year 2017, which we might upscale depending on the emerging environment. For the present, NTPC shall pursue its plans under government guidelines.

What will be the per unit cost of power in case of nuclear energy? What is the current cost for NTPC?
The cost per unit of nuclear power will vary depending upon the technology used, i.e. PHWR or PWR, etc. and also on the source of fuel supply. However, as per the initial studies carried out, it may vary from Rs 3-4 per unit. The average cost of supply from NTPC power plants was Rs 1.84 per unit during 2007-08.

Inflation is at its highest point in the last 16 years. Is it hurting NTPC in the same manner as it has the other sectors?
Inflation shall lead to some cost escalation for sure as the prices of steel, cement, etc. have gone up. This is likely to result in the capital costs going up. Further, the increase in fuel costs may lead to some increase in power costs.

Many private companies are trying their luck in the generation segment. Will they be able to fulfill the power demand of the country?
Efforts are required from all sectors to bridge the demand and supply gap in the sector. There is sufficient space for all players including private players to operate.

In India the open access policy has been there for quite some time but the execution has not been very encouraging. How we can make good use of this policy?[PAGE BREAK]

The open access policy envisages open access for 1 MW and above in a time span of five years from January 2004. The short-term and long-term open access is granted up to a period of three months and 25 years respectively. There is no provision for medium-term open access for a period between three months and 25 years. In spite of regulation passed by many SERCs, open access by direct consumers have not been taking place due to high cross subsidy surcharge, stand-by charges, etc.

There is a tremendous increase in the PAT of the company in the last two years. What is the reason for this and how do you envision the future?
The reported profit after tax (PAT) has increased by 17.95 per cent in 2006-07 and by 8.01 per cent in 2007-08 in comparison to the respective previous years. However, if we adjust the one-off items like FERV, wage revision provisions, previous year's sales, etc., the adjusted PAT has shown an increase of 20.18 per cent in 2006-07 and 14.98 per cent in 2007-08. The increase in adjusted PAT is in line with the increase in capacity and normal efficiency gains. It may be noted that since 2006-07, the income of BTPS has also been taken into account from June 2006 (the date on which it has been taken over by NTPC). As I have said earlier, NTPC has huge capacity addition plans. The profits are also expected to take a similar pace besides taking advantage from efficiency gains.