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Coal shortage due to rains; margins unaffected: NTPC

Published on Thu, Aug 21, 2008 at 10:58 | Source : CNBC-TV18

Updated at Fri, Aug 22, 2008 at 11:20

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NTPC

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The NTPC share has been buzzing down today. The shares are down almost 3% with fairly large volumes. There is a buzz in the market that NTPC may be facing a shortage of coal.

Chandan Roy , Director of Operations, NTPC said there is a slight problem in the coal supply due to rains, which resulted in a loss of 10 million units per day on an average. However, he is not worried and said the company would make up for coal problems in the coming months. He added that the company's margins were not impacted as coal price hikes were passed through. The company bore a loss of 500 million units in June and July due to rains, overhauls, he said.

Roy is confident the company will hit 98% plus PLF (Plant Load Factor) between October and March versus 92% PLF in FY08. He has installed a generation capacity at 30,000 MW. He is confident coal prices will be stable at Rs 750-1000 per tonne specific to quality and added the company imports 8 million tonnes from the overall 131 million tonnes of coal requirements.

Excerpts from CNBC-TV18's exclusive interview with Chandan Roy:

Q: We believe that there has been shortage of coal and you have difficulty in procuring it in the last couple of months, is that right?

A: No, this is not right. We had a bit of a shortage in terms of the day-to-day basis. These shortages are prevalent due to heavy rains but there is no generation loss on that account. The total installed generation capacity of our complete base is about 30,000 megawatts. We have lost about 10 million units per day on an average in the last one month. However, these things do happen during the monsoons. NTPC did 92% of plant load factor (PLF) last year. We are confident we will be close to that kind of an achievement this year.

We have benchmark across the world and have the highest plant load factor. We are far above the world benchmark in terms of plant load factor variability. We are also the second least polluters in the world.

Q: Has the shortage in this monsoon been any worse than it was in the previous monsoon?

A: From October to April we ramp up and generate almost 100%.

Q: But has that disruption in coal supply this monsoon been any worse than in previous monsoons?

A: It has been higher than the previous monsoons, but there is nothing to worry about because we are still going to make the same plant load factor or perhaps even more in this fiscal year. On Quarter on Quarter (QoQ) basis perhaps it is little more than last year.

Q: What was the capacity utilization in that quarter, in the current quarter, June-September quarter and how would that compare to either the Q4 or the previous June-September quarter?

A: In the last quarter we were about 90.2% of plant load factor and this year we are at about 90.1%. If you call this a reduction, it is academic because we are the same as last year at the moment.

Q: And what you anticipate will be the capacity utilization in the October-December period?

A; We probably will be very close to 98-100% between October and March. We are generally more than 98%, whether it will be 100-99% I can't say right now because we have very high level of maintenance taking place in these months.

Q: Can you take us through the coal prices? What was it in the June-September quarter and where do you see it panning in the October-December quarter?

A: Most of our coals prices are being linked to the CIL notified prices. These prices have been pretty much stable for last few years. Depending upon the quality it generally range from Rs 750 to about 1,050 per tonne.

Q: How do you expect the current FY09 revenues to pan out vis-�-vis FY08?

A: The revenues obviously will be higher because our generation capacity base has increased, so the revenues are going to be higher than the last year because our installed capacity base has increased.

Q: Would you see your margins trimmed a little because of coal prices?

A: No, because coal is a pass through and it will never be trimmed.

Q: So you don't see your margins impacted?

A: We are importing a very small percentage of coal. Coal prices are passed through in the tariffs, so it is not going to impact our revenues. On the contrary it might higher our revenues. But important thing is that the amount of coal we import is actually very insignificant. Of the 131 million tonnes of coal, that is required for NTPC, we are going to import roughly about 8 million tones. So that is not going to change the complexes of the tariffs or the margins.

Meanwhile Prasad Dahapute , Antique Stock Broking said that Coal India 's production is going up 4% on a YoY basis; whereas the requirement is going up by 8%. The government had estimated a shortage of 44 million tonnes in FY09

Excerpts from CNBC-TV18's exclusive interview with Prasad Dahapute:

Q: My Chandan Roy said that coal shortage is really a factor of monsoon and nothing to worry about?

Dahapute: Yes the monsoon always plays a factor. Coal India's production is going up 4% on a YoY basis; whereas the requirement is going up by 8%. Our production is lagging behind in a big way and that is why the CEA had estimated