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NTPC’s Moment Of...
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It seems to be a season of shocks for the nation’s prime source of power, the National Thermal Power Corporation (NTPC). Its equipment supplier, Russia-based Technoprom Exports, is sticking to its demand that NTPC pay an additional Rs 1,700 crore to compensate for higher steel prices, over and above the contract value of Rs 2,066 crore for delivering boilers for the 1,980-MW Barh project in Bihar. Even as NTPC plans to drag Technoprom to court over non-delivery of boilers, it is likely to fall behind its generation target of 50,000 MW set for the 11th Plan. Already, projects totalling 5,824 MW faces uncertainty due to the ongoing legal battles over gas supplies from KG Basin — between the two Ambani brothers and between Reliance Industries and NTPC.
However, NTPC’s eagerness to break the jinx around the Rs 8,700-crore Barh-I project, originally scheduled for 2006, is understandable as its implementation schedules are going haywire. “Of the 17.9 GW currently under construction, 5.4 GW including both Barh I and II would be deferred to the 12th Plan,” says Satyam Agarwal, power analyst at Motilal Oswal Securities.
As NTPC is well behind schedule, it is in a race against time to implement 4,900 MW in 2010-11 and 6,600 MW in 2011-12, nearly 75 per cent of the target in these years under 11th Plan. Analysts say there is an increasing risk of further slippages as two units of Barh 1 (660 MW each) could now come up only in 2012-13. The 1,500 MW Jhajjar project has a tight deadline of October 2010, before the Commonwealth Games in New Delhi, while most of its hydel projects including the 800-MW Koldam project are facing delays.
“Although its execution capabilities are amongst the best, the track record suggests that it might not be able to achieve its targets as envisaged,” says Girish Solanki, an analyst at Angel Broking.
NTPC’s 2008-09 financial performance reflects pressures all around. Although revenue grew 14 per cent to Rs 44,126 crore and profits stood at Rs 8,029 crore, up 10 per cent year-on-year, standalone operating profit was down 2.4 per cent at Rs 12,600 crore.
In the case of Technoprom, the Indian government’s diplomatic efforts to make the firm fall in line was met with the Russian arm-twisting on ONGC’s participation in Sakhalin-3, an oil-rich base in the former Soviet Union. With the dispute hitting a nadir following an Interpol probe into an alleged pay-off between Technoprom’s agent in India and a former head of NTPC, last year, the project may get delayed beyond the current Plan. Last year, Technoprom had lost a Rs 334-crore upgradation project (to 250 MW) to Bharat Heavy Electrical (BHEL) for refurbishing five power units in UP.
So, what went wrong in the NTPC-Technoprom deal? An executive with Adani Power, which uses equipment from Chinese firms such as Dong Fang and Shanghai Electric, says that escalation and non-escalation costs should have been spelt out at the outset itself. “During the implementation of our project, we also saw large fluctuation in steel prices, but were protected by the contract,” he says.
NTPC is going ahead with the Rs 7,341-crore, 1,320-MW Barh II project with BHEL. However, there is no word on its 1,960-MW Sipat-1 project in Chhattisgarh, which awaits equipment supplies from Russian firm Power Machines and South Korea’s Doosan Heavy Industries and Construction Co.
(Businessworld Issue Dated 18-24 Aug 2009)