NTPC slumps over 11% on CERC's draft tariff guidelines

NTPC slumped 11.29% to Rs 135.95 at 15:11 IST on BSE, extending intraday losses triggered by India's electricity regulator releasing draft regulations which will decide power tariffs for a period of five years from 1 April 2014.

Meanwhile, the BSE Sensex was down 60.37 points, or 0.28%, to 21,266.05.

Volumes were high on the counter. On BSE, 62.89 lakh shares were traded in the counter compared with average volume of 2.73 lakh shares in the past one quarter.

The stock hit a high of Rs 146 and a low of Rs 135 so far during the day. The stock hit a 52-week high of Rs 167.25 on 21 January 2013. The stock hit a 52-week low of Rs 122.65 on 28 August 2013.

The stock had underperformed the market over the past one month till 9 December 2013, rising 0.43% compared with the Sensex's 3.19% rise. The scrip had, however, outperformed the market in past one quarter, rising 14.20% as against Sensex's 10.67% rise.

The large-cap company has an equity capital of Rs 8245.46 crore. Face value per share is Rs 10.

The Central Electricity Regulatory Commission (CERC), the electricity regulator, has released draft multi-year power tariffs regulations for 2014-2019.

According to reports, the draft will set basis for regulations that will impact all regulated power generating and transmission companies like NTPC, NHPC, Sutlej Jal Vidyut Nigam, Torrent Power. The main highlight of this draft is that power tariffs are set to get cheaper.

The new draft is set to remove tax arbitrage that existed when companies like NTPC charged a higher tax rate from its customers leading to tax arbitrage for NTPC alone at Rs 500 crore per year. Tariffs are thus set to decline with lower tax arbitrage.

Further, CERC has not changed the operating and maintenance expenses. However, with no change in the operating and maintenance expenses, the efficiency of power companies is set to increase, leading to lower tariff rates, reports added.

While CERC has maintained the RoE (Return on Equity) at 15.5% with additional 0.5% for timely completion of projects for generating and projects, it has reduced incentives for generation as well as transmission.

The draft guidelines also proposed to change the incentive structure from Plant Availability Factor (PAF) to Plant Load Factor (PLF).

PAF is the average of daily declared capacities (of 'available for generation' capacity) of a generating station as a percentage of installed capacity while PLF is amount of power actually generated as a percentage of installed capacity.

Earlier, even if a generating station notified its 'availability' (ready to generate power if buyer was willing to buy it) they were rewarded. Now they would only get the benefit if the buyer actually consumes or purchases power. What it means is that power generating units will be affected if state electricity boards are not willing to purchase power. Though a prudent step by CERC, it would affect the profitability of generation companies, media reports suggested.

NTPC announced after market hours on Monday, 9 December 2013, that the government has appointed Kulamani Biswal, director (finance), Mahanadi Coalfields as director (finance) on the board of the company for a period of five years with effect from 9 December 2013.

NTPC's net profit declined 20.7% to Rs 2492.90 crore on 0.9% growth in net sales to Rs 16272.27 crore in Q2 September 2013 over Q2 September 2012.

NTPC, India's largest power company, has presence in the entire value chain of power generation business. The Government of India (GoI) holds 75% stake in NTPC (as per the shareholding pattern as on 30 September 2013).

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