Hydro power corp fails to realise potential

Though the National Hydro Power Corporation (NHPC) and the National Thermal Power Corporation (NTPC) were born in the same year, their planets were clearly in different orbits.

While the NTPC went on to become a Rs 28,750 crore company with a generation capacity of 26,000 Mw, its hydro cousin is less than 4,000 Mw in capacity on a turnover of about Rs 1,800 crore over its 31-year existence.

"Thermal was given much more attention than hydro," said S K Garg, chairman and managing director, NHPC.

Hydro, which accounted for over half of the country's energy basket in the 1960s, has declined to 26 per cent today, despite its obvious advantages like free fuel (water).

Hydro also went out of favour because it is a tougher nut to crack. Hydro power is capital intensive, requiring investment of about Rs 5 crore per Mw compared to Rs 3-4 crore for a thermal plant, and time-intensive, taking almost 5 years to be ready, while thermal plants can be put up in 3-4 years. Further, much of the work is in far-flung areas and underground, where "geological surprises" are common.

The upside, however, is that hydro power is environment friendly (unlike competing fields like coal) and tariffs reduce over the age of the plant, touching almost zero after a few years.

Not surprisingly there is an awakening to the benefits of hydro power, and a new hydro power policy, to realise the 1,50,000 Mw hydro power potential that the country has, is on the cards. Only about 20 per cent (33,600 Mw) of this potential has been realised so far.

Aiming for 10 K: The NHPC wants to be at the forefront of this growth in hydropower. "We want to be a 10,000 Mw company by 2012," said Garg.

About a dozen projects are "under construction" and set to be completed by 2012 which would add about 6,000 Mw to its existing capacity of 4,000 Mw. Adding on the other 12,000 Mw in various pre-construction stages would take the company to its next milestone of over 20,000 Mw by 2017, he further said.

This capacity expansion would require funds "" the investment in the 2007-2012 period itself is estimated at Rs 30,000 crore. Bulk of this requirement would be met through debt, while budgetary support (Rs 6,000 crore), internal accruals (Rs 5,000 crore) an IPO would make up the rest of the numbers.

IPO by June 2007: The government-owned company has recently got the approval for an IPO of up to 24 per cent of share capital. Analysts expect this issue to raise about Rs 2,500 crore.

Whether it will be done at one go, or in tranches is a decision which is yet to be taken by the six-member board. "We are in the process of appointing merchant bankers and legal consultants," Garg said.

The NHPC is one of the four government-owned companies which are seeking funds from the public. The parent ministry wanted these companies, NHPC, PFC, REC and PGCIL, to complete the issue by the close of the financial year in March.

"We are trying for March," said Garg, but admitted that it would be difficult to meet the deadline.

Growing Margins: Investors would be impressed by the turnaround in numbers that the company has managed with margins as high as 40 per cent "" last year, the company posted a net profit of Rs 743 crore on a turnover of Rs 1,834 crore.

"We should be crossing Rs 800 crore (in net profit) this year (2006-07)," said Garg. The other upside for the NHPC is that it has "100 per cent collection efficiency" for a business which tends to be seasonal.