Analysis of

Table

NTPC Heading for

128 GW of installed
capacity by 2032

Of

In partial fulfilment of Sustainability course

Based on sustainability framework

Content

Memo of transmittal . .. 03
Introduction. . ... 04
Key Aspects from NTPC Annual Report. .. 05
Analysis based on PPP Framework.. .. 07
Recommendation....... .. ..10
References.......... .. ..11

Memo of transmittal
This document is submitted in partial fulfillment of the Sustainability course as a submission
towards the individual assignment component. It contains analysis of the decision taken by
NTPC to go for 128 GW of installed capacity by 2032.
The decision has been scrutinized on every parameter of PPP (Planet, People and Profit)
framework and, the positives and negatives have been stated. Based on this, it is recommended
that NTPC should go ahead with its decision of expansion, however, take into account that at
least 75% of projected power should come from renewable sources of energy.
Please let me know in case any discussion is needed, so that a meeting could be arranged as per
your convenience.

Introduction
NTPC is one of the biggest power generating companies of India. Indias current power
requirement is approx. 245 GW out of which NTPC is supplying 50.5 GW. It is forecasted that
the Indias requirement would go up to 800 GW by 2032. To contribute to this growth in power
consumption, NTPC is planning to increase its production capacity to 128 GW by 2032.
In line with the corporations mission and goal of reducing dependency on fossil fuels, NTPC has
chalked out a road map that envisages an installed capacity of 128 GW by the year 2032 with a
well-diversified fuel mix comprising 56% coal, 16% gas, 11% nuclear energy, 9% renewable
energy and 8% hydro power based capacity.
As such, by the year 2032, 28% of NTPCs installed generating capacity will be based on carbon
free energy sources. Further, the coal based capacity will increasingly be based on high-efficientlow-emission technologies such as Super-critical and Ultra-Super-critical. Along with this
growth, NTPC will utilize a strategic mix of options to ensure fuel security for its fleet of power
stations.
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Presently, most of its power is being produced by thermal power plants which uses coal and gas
as fuel. These being non-renewable energy sources, would create supply problems in future. A
small percentage of power generation comes from renewable sources of energy. NTPC
forecasted growth can be achieved only if it has a healthy combination of renewable and nonrenewable sources of energy. To evaluate the forecasted growth there are various parameters that
needs to be considered such as Power demand in the country, Dependence on coal, Cost effective
measure, Country's focus on renewable energy, Financial condition of electricity distribution
companies etc.

Key Aspects from NTPC Annual Report

Operating Performance
NTPC has consistently demonstrated superior operating performance. For Q4FY15, the
company reported average PLF of 82.68% and average PAF of 97.18% for coal based plants
(vis-a-vis average Plant Load Factor (PLF) of 88.70% and Plant Availability Factor (PAF) of
99.75% for Q4FY14). The PLFs for gas based power stations remained low and stood at
26.68% for Q4FY15 (35.64% for Q4FY14) which is attributable to shortfall in supply of gas
from domestic sources and low demand for RLNG and Naphtha based power due to its high cost.
Nevertheless, PAF levels for gas based plants remained high at 96.46% for Q4FY15.
As seen in Chart 1 & 2, the PLFs for coal based generating stations of NTPC have remained
higher than all India average during FY2013-FY2015 led by higher position of these stations in
the merit order dispatch of the state distribution utilities, given the relatively lower tariffs offered
by the central utility owing to its cost efficient operations. However, the PLFs for gas based
stations of NTPC has seen a declining trend as seen with other gas based stations owing to
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shortage in domestic gas production. The PLFs for private sector coal based IPPs has seen a
mixed trend during FY2013-FY2015 which depend upon various factors such as a) merit order
position, b) availability of fuel pass-through in PPA in case of imported coal dependence, c)
operations during the stabilization period post CoD, as well as d) exposure to merchant market
for the capacity which is tied-up in short term PPA.
Chart 1: Trends in PLFs for coal based and gas based capacity of NTPC

Chart 2: Trends in PLFs for major coal based Private IPPs

Company recorded total income of Rs. 75362.37 crore in FY 2014-2015 as compared to

74664.61 crore in the FY 2013-2014. Net Profit after Tax (PAT) of Rs 10290.86 crore.
Healthy Cash collections
Under the securitization scheme under which NTPCs payments are secured bills and are
required to be paid within 60 days. The bills for month t are raised in the first week of month
t+1 and the same have to be paid off by the last day of month t+2. However, if bills are
cleared off within month t+1, rebates are paid. Until FY2011 almost all utilities were paying
bills by end of t+1 month, however since FY 2012 most utilities being cash strapped are paying
off by end of t+2 month. On the positive side however in-spite of this slippage, NTPC continues
to maintain collection efficiency of 100%. In addition, redemption of bonds and interest therein
are being serviced on time.
Financial strength

Total revenues Rs. 75,362 crore and Profit After Tax of Rs. 10,291 crores in FY15
Total Assets of over Rs. 1,97000 crores as on FY14-15-year end.
Paying dividend consistently for last 22 years with dividend payout ratio of around 4050%. NTPC is amongst top 5 dividend paying companies in India in financial year 201415. The Company rewarded its investor with bonus debentures @ Rs.12.50 against equity
share of Face value of Rs. 10 each during 2014-15 out of its reserves.
Debt equity ratio of 1.05 times for the year 2014-15 and current ratio of 1.22 times
Compound Annual Growth of 16% in total fixed assets and capital work in progress in
last 5 years.
Unparalleled collection efficiency in the industry. Outstanding receivables of 38 days
only. Collecting 100% dues from its customers consistently.
Bottom line has been consistently attractive- 4th largest net profit in all PSUs after
ONGC, Coal India and SBI in FY 2014-15
Equity locked in Capital work in progress will be converted into operational assets in
next 3-4 years which will give a big push to total profits as well as Return on Assets
(RoCE) and equity (RoE).

Analysis based on PPP (Planet, People and Profit) framework

Within the industry, many of the times the relative importance every P with respect to other is
debated, however, an economist with a sustainable vision gives importance to planet, people
followed by profit in the descending order. S/he understands that the Planet is an exhaustive set
and the People are a subset of this. Moreover, the term profit will make sense only if the planet
and people exist. Profit is meant for people and planet and not the otherwise.

Planet
A. Ill effects of coal on Planet
The environmental impact of the coal industry includes issues such as land use, waste
management, water and air pollution, caused by the coal mining, processing and the use of its
products. In addition to atmospheric pollution, coal burning produces hundreds of millions of
tons of solid waste products annually, including fly ash, bottom ash, and flue-gas desulfurization
sludge, that contain mercury, uranium, thorium, arsenic, and other heavy metals.
There are severe health effects caused by burning coal. According to the reports issued by the
World Health Organization in 2008 and by environmental groups in 2004, coal particulates
pollution is estimated to shorten approximately 1,000,000 lives annually worldwide, including
nearly 24,000 lives a year in the United States. Coal mining generates significant additional
independent adverse environmental health impacts, among them the polluted water flowing from
mountaintop removal mining.
The combustion of coal is the largest contributor to the human-made increase of CO2 in the
atmosphere. Electric generation using coal burning produces approximately twice the greenhouse
gasses per kilowatt compared to generation using natural gas.
In 2008 James E. Hansen and Pushker Kharecha published a peer-reviewed scientific study
analyzing the effect of a coal phase-out on atmospheric CO2 levels. Their baseline mitigation
scenario was a phase-out of global coal emissions by 2050. Under the Business as Usual
scenario, atmospheric CO2 peaks at 563 parts per million (ppm) in the year 2100. Under the four
coal phase-out scenarios, atmospheric CO2 peaks at 422446 ppm between 2045 and 2060 and
declines thereafter.
B. Analysis of NTPCs decision
Though NTPC is aiming for a well-diversified fuel mix comprising 56% coal, 16% gas, 11%
nuclear energy, 9% renewable energy and 8% hydro power based capacity, it is going to impact
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environment severely. Presently, NTPC generates approximately 30 GW of power using coal.

This number is going to be more than doubled by 2032. Clearly, the carbon footprint of this
power generation is going to be twice as much as it is today.
The figure 56% may disguise the reader and s/he may assume that the rest is from renewable
energy sources. The modern studies signal that even the hydro-power has an adverse impact on
the planet as whole by affecting the local eco-system. Moreover, the fukushima and Chernobyl
disasters gives the warning signals to NTPC not to expand in this direction.
It can be concluded that hardly 25% of the proposed energy sources have little implications on
the plane. Hence, NTPC should reconsider its decision of choosing the appropriate medium to
expand. The proposals of choosing the medium should be backed by detailed EIA studies.

People
Undoubtedly, people needs energy and planet is the source of this energy. Its a duty and moral
responsibility of Govt. and in turn of NTPC to provide basic electricity services to all the citizens
of this country. Moreover, the projected double digit growth of our nations needs to be backed
with robust power generation. And, hence the decision of NTPC to go for 128 GW of power
capacity expansion is a much needed one. However, the people needs to understand that they are
not isolated from the planet.
People are the subset of planet. Its the people who needs the planet for their growth and
evolution/development and not the otherwise. People will exist and human race will continue
only when the planet is protected. Hence, for the good of entire humanity, its imperative to
protect the environment/planet. We need to understand that environmental protection is not
different from our own protection.

Profit
A. Linking profit to Sustainablity
Profit is what matters the most in the corporate world. Every PGP student is being taught that
maximizing the shareholders wealth should be the primary objective of his/her as a future
Manager. However, the sustainability course links profit with environment/planet. It suggests
that efficiency and sustainability are the two sides of the same coin. If as a manager one has
succeeded in making the process efficient and thus has reduced the production cost, in turn, s/he
has also taken a step in the direction of sustainability.
Efficiency = Lesser usage of energy (or lesser wastage of resources) = Sustainability

This course further inculcates the notion that profit is a subset of people which in turn is a subset
of planet. Profit generated is of little importance if it has come from compromising the
environmental aspects. Hence, profit needs to be tested on the grounds of sustainability.
B. NTPC Battle between profit and sustainability
NTPC, being a company, needs to think about its employees and shareholders welfare. Thus,
while taking any of the long term strategic decisions, profit becomes an important parameter.
Further, it has become even more difficult for NTPC to generate steady cash flows because of
following reasons
Erratic supply of coal from CIL
Rising Account receivables due to delayed payments from state electricity board
Govt. Interventions
Delayed projects due to Land acquisition laws
Hence, its going to be a tough task for NTPC to go for its proposed expansion of 128 GW by
2032.
Under such circumstances, any of the rational Board members of NTPC will advise it to choose
cheaper and reliable medium of power generation for future expansion. Thermal power being the
core competency of NTPC, it looks a logical decision to invest heavily in this medium and
ignore the other.
However, a visionary environmentalist will observe the long term pros and cons of this decision
and will not only test it on profit, but also on the sustainability parameter. EIA and carbon foot
print analysis will help converting the impact on environment in monetary form. Moreover,
though NTPC is facing challenges to maintain a steady cash flows, there are other means to
tackle these problems. The analysis of Annual report of NTPC clearly shows that it is sitting on a
giant pile of 10,000 crores of liquid assets which should be leveraged for investing in renewable
energy sources. The energy generated by renewable sources can be traded in the form of cvarbon
credits and thus monetary benefits can be obtained.

Recommendation
It is evident that India is an Emerging Market Economy and hence it has to aggressively invest in
power generation to fulfill the rising demand of electricity by industries. Any lacunae in supply
of electricity may be detrimental for the long term objective of India i.e. to be a superpower by
2050. The target of 24x7 electricity till the remotest corner of country seconds this expansion in
terms of power generation.
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However, the medium India choses to fulfill this rising energy demand is going to determine the
overall implications on planet and thus on the humanity as a whole. In a short run, though the
thermal power may seem to be a profitable and practical medium, in longer run the time value of
money analysis (taking environmental impact assessment into consideration) will prove it to be a
misnomer. Many of the times countries give priority to the Profit and not the Planet, just because
profit will hamper the country whereas the ill effects on Planet will be distributed more or less
equally over the entire world.
India which follows Vasudhaiva Kutumbakam philosophy should be concerned about the entire
humanity. And, NTPC being the largest producer of energy should comply to this notion. The
above analysis of the decision of NTPC to go for 128 GW of capacity by 2032 demands for more
than the prescribed investment in renewable sources of energy.
Hence, it is recommended that NTPC should roll out only those thermal, hydroelectric, and
nuclear plants which are presently under construction and should not go ahead with a single new
plant. It should redesign its strategy and generate rest of the energy using renewable sources like
solar, wind etc. The projects which are under construction are expected to provide 25% of the
proposed electricity and hence the rest 75% of electricity should be generated using renewable
energy.

References
http://www.ntpc.co.in/
Annual Report NTPC
http://www.icra.in
https://en.wikipedia.org/wiki/Nuclear_power_in_India
https://en.wikipedia.org/wiki/Solar_power_in_India
https://en.wikipedia.org/wiki/Wind_power_in_India
https://en.wikipedia.org/wiki/NTPC_Limited
https://en.wikipedia.org/wiki/List_of_power_stations_in_India

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