NTPC's old-plant plan might boost equipment sector

Company plans to improve falling plant load factors of seven of its power plants, that are more than 25 years old

State-owned power generator NTPC Ltd's plan to spend around Rs 9,600 crore to revive its old power plants might help revive the ailing power equipment sector as well.

NTPC plans to improve the falling plant load factors (PLFs) of seven power plants that are more than 25 years old. “We already have approvals for three of the power plants and will get them for some more,” said A K Jha, director-technical.

This is part of the plan to extend the life of three coal-based and four gas-based power plants. The total capacity of these plants is around 5,000 Megawatts. The company had helped some non-NTPC power plants increase their PLFs. In one case, a power plant with around 19 per cent PLF was revived to take its capacity to around 90 per cent, Jha said. He added around 70 per cent of the intended budget will go into equipment ordering.

These orders will help the power equipment sector, which has been waiting for orders for a long time. “The Chinese competition has ebbed after a duty of 21 per cent has been levied. But Indian power companies have not been ordering,” claimed Amit Patil, a capital goods analyst at Angel Broking.  

Many Indian companies have set up domestic facilities for boilers, turbines and generators in the last five years. While equipment capacity came up over the last few years, there have been instances of payment delays and cancellation of orders that were already placed. The country's largest player, Bharat Heavy Electricals Ltd, is also expanding capacity.

However, ever since, coal-related worries have made many power companies freeze their expansion plans.

“NTPC is best placed to order equipment, as they have already signed power purchase agreements, and has the maximum number of cleared projects,” said Patil. The last few orders, which have been counted into the books of JSW Toshiba and Alstom Bharat Forge, were a part of NTPC's bulk tendering in 2011.  

M S Unnikrishnan, managing director, Thermax, said some orders as part of old plant revival by NTPC have already been tendered out. He also hoped that his firm would have some play in the orders. “But, these will not be bulk tenders. A study will have to be done on the boiler repairs that have to be done, and then there would be orders,” he claimed.

However, as many of the old power plants of NTPC are supplied by BHEL, an industry expert said, the state-run firm would have an edge over these orders since it possessed the requisite spares.

Even if indigenous power equipment makers manage to win orders from NTPC, analysts say they would have lower margins. The power equipment business has the highest margins in the capital goods, which can go as high as 19-20 per cent. Since many Indian players are vying for fewer orders, competition will erode these margins.

“More orders from NTPC will still be good news, though it will be a play on fixed costs (for equipment makers) and they will recover costs, even as their profitability will be reduced,” said Patil. Apart from NTPC, there are very few orders from the power sector, complains the industry. "Nothing much is expected in  terms of orders from the power sector," said Unnikrishnan.

NTPC'S POWER PLANTS TO UNDERGO LIFE EXTENSION
Gas-based power plants

• Kawas
• Jhanor-Gandhar
• Auraiya
• Dadri

Coal-based power plants

• Singrauli-I
• Korba-I
• Ramagundam-I