NTPC set to go on buying spree in big relief for troubled private sector players

In a move that may bring some relief to the troubled private-power sector, state-run NTPC is looking to buy operational power assets that runs on domestic coal. The thermal power firm said that it is specifically interested in power production units which have fuel allocation to adequately run the plants at 85% plant load factor (PLF). Only those units commissioned after April, 2014 are eligible for the acquisition. The power sector in the country is hurt by weak finances of state-owned distribution utilities coupled with the tepid rise in power demand. This has created stressed assets with a capacity of 60 giga watt (GW).

According to industry sources, more than 15 GW of power generation units fit the eligibility criteria set by NTPC. Among these, troubled projects such as Jindal India’s 1,200 MW and Jaypee Group’s 1,320 MW Nigrie power plants were recently identified as ripe targets for potential acquisition by JM Financials. GMR Energy’s 1,370 MW Raikheda power plant and KSK Energy’s 1,200 MW Akaltara power units also meet the NTPC conditions. These two plants were the part of the 25,980 MW of power generation assets, which according to industry sources, are up for sale.

A person aware of the developments said that NTPC has not set any cap on the generation capacity it would add to its portfolio through this route. It is also not clear if the reverse auction would be conducted on cost-per-MW basis, or according to the cost of generating a unit of electricity. Only power units of 500 MW or above can participate for the auction. NTPC currently has an installed capacity of 51,708 MW, comprising of 28 coal-based, eight gas-based and three renewable and hydro power projects. The company has formulated a long term corporate plan to become a 130 GW company by 2032. NTPC, along with its joint ventures, currently has 19,654 MW of power projects under construction.

Contrary to independent power producers, NTPC is insulated from the peril of low power purchase agreement (PPA) availability, reflected by higher than average PLF levels at its plants. According to research firm ICRA, Absence of long-term PPAs has brought 26 GW of thermal power assets under stress as weak financial health of the discoms has led to slow progress in signing of long-term PPAs through competitive bidding. Only 1.4 GW capacity tied-up through long-term PPAs over the past three years. After buying the power plants, NTPC will try to get PPAs for their untied capacities. NTPC would accept proposals for sale till January 5.