NTPC reorients operations to reduce power cost

The country’s largest power generating company NTPC, for the first time, reduced its coal consumption by as much as 5.5 per cent thereby reducing its fuel cost by Rs 1.65 per unit. But at the same time, increased its power sale to 250 billion units. As part of a reorientation to reduce costs but keep its revenues on a growth trajectory, the thermal behemoth is shifting gears across the board.

This resulted in NTPC clocking an average PLF of 78.59 per cent with its pithead plants running at around 83 per cent during the last financial year. This was when the national average PLF was hovering around 60 per cent. At the same time, it crossed the mark of 250 billion units of power sale in 2016-17.

While the coal quality has considerably improved, NTPC is maximising output by adopting a unique plan. “We are running the efficient plants at higher plant load factor (PLF) and this includes the pithead plants. This means better quality coal is used in the efficient plant with minimal transportation cost. Coal swapping and fuel supply rationalisation has kicked off in all units of NTPC," said a senior NTPC executive.

“As part of our commitment to the power distribution reforms – Uday, we are maximising the benefits for the discoms by reducing the costs so that they purchase more power. It helps the whole supply chain,” said another executive in the know.

For instance, two of the most efficient power plants of NTPC – Mouda and Barh-II saw their fuel cost reducing by 30 per cent in two financial years, owin the to improved quality of coal and operational efficiency. Reduction in fuel cost translated into 40 paisa reduction final tariff for the consumer, NTPC told the paper.

A senior sector expert pointed that with lowering power cost, discoms get a lot of room to manage their finances.

State owned power distribution companies are undergoing restructuring through the Ujwal Discoms Assurance Yojana (Uday). Uday MoU envisages financial and operational turnaround of the discoms. One of the first steps for the state government is to take over the debt of the discoms and issue bonds against it. This cleans the financial slate of the discoms but future financing would depend on the operational performance of the discoms.

Those states which sign up for Uday have been offered slew of benefits from the Centre such as ratioanalised coal supply, priority status in power supply from NTPC, and several measures to reduce the cost of power. NTPC has been made party to Uday to ensure cheap power reaches the Uday states.

NTPC executives said power demand from their consumers increased by 6 per cent in one year. “As cheaper power helps the discoms buy more and manage their loss reduction, it paves way for more supply, thereby keeping our average realisation balanced,” said an executive. The average realisation of NTPC was 80 per cent during last financial year, as compared to 77 per cent in 2015-16.

By improving efficiency, NTPC has been able to attract a variety of funding – from Euro Bonds to Masala bonds and global funds. The average cost of funding for NTPC was close to 7.5 per cent, the lowest ever for the sector. Company executives said 1 per cent decrease in interest translates to 10 paisa reduction in final power rate.