India's NTPC to spend $ 5.5 bn to cut blackouts

NTPC, India's biggest power producer, plans to spend rupees 250 bn ($ 5.5 bn) building generation plants next fiscal year to reduce blackouts in the nation. New Delhi-based NTPC will borrow about 70 % of the planned expenditure, which is a 39 % increase over the estimated spending of rupees 180 bn in the year ending March 31, Chairman R.S. Sharma said.
"We will contribute the equity portion from our internal accruals and the debt has all been tied up, mostly from Indian banks," he said.

NTPC, generator of a fifth of India's electricity, needs to accelerate construction of power plants after failing to meet its target for adding capacity this year because of equipment delays. State Bank of India, Life Insurance Corp. of India and Power Finance Corp. are among financial institutions that have approved loans to NTPC, Sharma said over phone from London.
"The liquidity situation is improving and lenders are more comfortable funding power projects because their return profile is stable," said Mahesh Patil, who holds NTPC's shares among the $ 3 bn he helps manage at Birla Sunlife Asset Management in Mumbai. "This is the time for power generators to grow."

Energy demand has soared in the world's second fastest- growing major economy, which faces a peak power shortage of as much as 12.6 %.
India's economy may expand 8 % in the year ending March 31, Finance Minister Pranab Mukherjee said in December last year.

Share sale
India's federal government, which owns 89.5 % of the company, will start the sale of a 5 % stake on Feb. 3 as part of a plan to raise funds to build roads and ports. The sale could raise more than $ 2 bn, based on NTPC's current share price. NTPC plans to complete plants that will generate 4,500 MW in the year starting April 1. That's about 15 % of the current capacity of 30,664 MW set up by NTPC and its venture partners. One MW is enough to power about 200 middle-class Indian homes.
The utility will place orders for plants to generate 14,000 MW of power in the next fiscal year and as much as 20,000 MW in the following year, Sharma said.

Bids are being invited until Jan. 28 to supply equipment for five projects with a combined capacity of 7,260 MW, including a 1,320 MW project of state-owned Damodar Valley Corp. NTPC will miss its target of adding 3,300 MW of generation capacity in the year ending March 31 because of delays at a proposed 660 MW unit at Sipat in the central Indian state of Chhattisgarh, Sharma said.
"We are confident of achieving 2,000 MW" and are trying to start more units, he said.

Easing shortages
NTPC started generation at a coal-fired unit at Dadri in north India on Dec. 25, helping ease power shortages in the nation's capital New Delhi. The Dadri unit is producing 200 MW and is expected to generate its full load of 490 MW by the end of January, Sharma said.
The utility has set a target of installing 75,000 MW of capacity, or 25 % of the country's power plants, by March 2017. Still, capacity addition has fallen shortof target, slowed by delays in equipment supply, the government has said.

"The high debt won't matter much if they can execute their projects as their debt to equity ratio is very comfortable," Abhineet Anand, an analyst at Antique Stock Broking, said.
"Most of their units are delayed, which is a key concern for investors."