>NTPC (HDFC SECURITIES)

Q1FY10 Result Update

NTPC’s principal business is generation and sale of bulk power. Other business includes providing consultancy, project management and supervision, oil and gas exploration and coal mining. The total installed capacity of the company as on 31 March 2009 is 30,144 MW including that under joint ventures. NTPC commissioned a 500 MW Unit 7 of Kahalgaon Super Thermal Power Project- Stage II on 30 June 2009, taking the total capacity to 30,644 MW. Of this, 24,709 MW is coal based capacity and the rest gas.

NTPC, India’s largest power generator came out with its Q1FY10 results. NTPC’s Q1FY10 results were above street expectations led by new regulations from the Central Electricity Regulatory Commission (CERC), 2,000 MW y-o-y increase in capacity to 27,850 MW
(standalone) and increase in gas plant PLF (plant load factor) from 67.2% in Q1FY09 to 79.87% in Q1FY10. NTPC’s ESO (energy sent out) sales rose ~11% y-o-y to ~ 52 bn units. Operating margins improved to 26.5% in Q1FY10 vs 25.4% in Q1FY09 due to lower
employee cost (as a % of sales). Q1FY10 PAT rose 27.1% y-o-y to Rs. 2,196.6 cr. We present an update post the analyst meet.

KEY HIGHLIGHTS OF 1QFY10

■ NTPC reported generation revenues of Rs. 11,968.6 cr in Q1FY10, up 25.8% y-o-y and 4.4% q-o-q. This was largely on account of increased generation from 4 units (2,000 MW) that were declared commercial during FY09. Further, the PLF of the gas plants also improved from 67.2% in Q1FY09 to 79.87% in Q1FY10 (increased availability of gas and spot LNG). It generated about 55 billion units during the quarter registering a growth of about 9% y-o-y and down 2.5% q-o-q. The average realization per unit sold was Rs.
2.3, an increase of 13.5% y-o-y and 14.6% q-o-q.

■ Other than the increase in commissioned capacity and increase in PLF, the topline was also in accordance with the new tariff regulations by CERC regulations, which stipulates a ROE of 15.5% for thermal power plants as against 14% in the 2004-09 regulation. However, while the increase in topline and profit can partly be attributed to the change in regulation, the full impact of the regulation is yet to be understood. The management during the analyst meet indicated that the change in CERC policy is neutral for NTPC. In the notes to the quarterly results, the management has indicated that the sales for Q1FY10 as per the new regulations amount to Rs.11,970.8 cr, while as per the earlier regulations, they would have been Rs.11,485.4 cr.

■ Average PLF for the quarter was higher for the coal based plants as well as gas based due to increased availability of fuel. NTPC received 32.85 mmt of coal during Q1FY10 (of which 3.25 mmt was imported coal) as against 28.7 mmt in Q1FY09. Q4 is typically the best quarter for power plants due to a seasonal impact (demand from corporates / industries is generally higher during the last quarter for the financial year). Similarly, in case of gas NTPC received 14.03 mmscmd as against 11.39 mmscmd received in Q1FY09. Given the sharp fall of LNG prices over the past year, NTPC’s spot and fallback RLNG received during the quarter increased to 5.1 mmscmd as against 2.57 mmscmd during Q1FY09. The table below summarizes the performance of NTPC in terms of PLF.

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