Letter to Shareholders
We are in the midst of a global public health crisis which isthreatening the entire humanity. The spread of COVID-19 virus has presented extraordinarychallenges to the global economy and human livelihood. Our Government has taken steps forcontaining the spread of COVID-19. Everyone has been rightfully applauding the front lineCorona warriors including medical professionals and essential service providers. YourCompany is also provider of essential services. Electricity is an essential part of ourlives. Its importance has further increased during this period as it is critical inproviding emergency services and facilitating lifesaving equipment. Electricity supplyalong with internet services has been the key to keep the businesses hospitals schoolsand offices running as a majority of people have started working from home. This hasclearly brought additional responsibility on your Company and the work being done at thepower stations to keep up the generation is noteworthy and needs to be acknowledged andapplauded.
At the same time your Company has taken all the measures to keep thegenerators on bar to meet the grid demand while complying with the required protocols asspecified by the Government of India State Government and local administration where wehave operations and the situation is being reviewed on a daily basis. Further yourCompany has maintained constant communication and dialogue with all the stakeholders. YourCompany has also taken proactive measures to prioritize the health of its employees andtheir families.
As a responsible organization your Company has extended support toGovernment agencies in every possible manner. This has been done by supplying essentialfood items for the needy as well as providing medical equipment and hospital facilities tothe local authorities.
Before presenting the performance highlights I would like to saythanks to each one of you for your continued support and investment in NTPC. This is alsowishing that all of you stay safe and healthy.
Your Company had shown outstanding performance in FY'20 as welland achieved several milestones in operations new capacity addition and on the renewableenergy front. Your Company has set a new benchmark by adding 5290 MW of commercialcapacity which is the highest ever achieved in any year since inception. Anotherimportant event has been the acquisition of Government of India's stake in NEEPCO andTHDC which has added substantial hydro capacity to your Company's portfolio. Evenduring the COVID period 984 MW of commercial capacity has been added which demonstratesNTPC's inherent resilience. With all these your Company has become a 63 GW Company.On the generation front the Company's group generation stood at over 290 BUs in FY20. There is slight decrease in the total generation when compared to previous year due toreduction in demand and extended monsoon season. However we could significantly reducethe under recovery of capacity charges when compared to previous years and improvedmachine availability. In FY20 your Company's PLF has consistently maintained apositive difference of over 12% as compared to the National PLF. Company's coalstations achieved a PLF of 68.20% during the year 2019-20 as against National PLF of55.89% and four stations of NTPC figured in top ten stations list of the country in termsof PLF. Your Company has recorded the highest ever single day generation of 977.07 MUs onJuly 28 2020. Additionally your Company's 1st and the oldest Unit Singrauli Unit#1which was put to commercial operation in 1982 has registered a PLF of 101.96% in Q1 FY21which is the highest in the country. The feat achieved by the 38 years old Unit stronglyreflects the Operation and Maintenance practices being adopted by your Company and thecompetency of people operating the Units.
In FY'20 your Company recorded a profit of Rs 10112.81 Crore.The profit before tax is Rs 14465.92 Crore as against Rs 12672.52 Crore in the previousyear registering an increase of 14.15%. The total income has crossed Rs 100000 Crorefor the first time and the Company declared dividend of Rs 3117 Crore to shareholders.This is the 27th consecutive year that the Company has paid dividend.
In FY'20 your Company incurred capital expenditure of Rs 36618Crores (including Rs 11500 Crores for acquisition of GoI stake in THDC and NEEPCO).
Your Company has changed its focus completely and is pursuing renewablecapacity addition aggressively. We have taken the decision not to acquire any further landfor thermal projects in near future and the entire focus will be on carbon free sources.Contracts have been awarded and work has started for adding over 2 GW of solar PV capacityduring the year by winning various tenders through competitive bidding. Currently over2400 MW of RE projects are under construction including 237 MW of floating solar projectson water bodies within NTPC's existing power stations. In order to get access tolarge tracts of land for RE projects discussions are in progress with State Governmentsfor allocation of land parcels for setting up of renewable projects. These would bedeveloped under Ultra Mega Renewable Energy Power Parks scheme of the Government of India.Further your Company is working on partnerships with agencies like National Investmentand Infrastructure Fund (NIIF) and ONGC (a Maharatna Company and India's largestcrude oil and natural gas Company) who have shown interest in working with your Company inrenewable space.
To optimize cost improve competitive edge bring synergy in operationsand to add renewables with a focused approach your Company has taken decision forformation of a separate subsidiary Company for carrying out renewable energy business. By2032 your Company is aiming to add 32 GW of renewables both by organic and inorganicroute and targeting to become the largest renewable energy Company in India.Sustainability:
Your Company has taken a major leap and adopted integrated reportingfor sustainability performance disclosure along with financial disclosure. Your Company iscommitted to bring fundamental changes in the way of operating business to transformourselves as the most sustainable power producer and a supplier of choice. Aligned withits sustainability priorities your Company has formed its board level Sustainabilitycommittee to oversee ESG and climate change related issues.
In its quest to deliver sustainable and affordable energy yourCompany's recent acquisition gave access to large operational hydro capacity. Withthis the total zero-carbon based energy capacity reached 7%. Your Company is targeting toachieve 30% emissions capacity through non-fossil sources by 2032. Further with targetedRE addition we anticipate to reduce our specific CO2 substantially over next few years.
Your Company is enhancing resource efficiency through reduced coalconsumption by adopting co-firing with biomass and optimization of water consumption. YourCompany is committed to championing the circular economy. Ash utilization has improved by16% when compared to previous year. Significant thrust is being put on further increasingash utilization effectively on a sustained basis. Further your Company is also focusingon developing Waste-to-Energy plants and significant action has already been taken. YourCompany is diligently following ESG principles and have implemented strong ethics faircorporate governance effective risk management extensive stakeholder engagement andstringent safety measures at all of its establishments. Corporate Social Responsibilityhas been another focus area of your Company. Several initiatives are being taken toimprove the socio-economic condition of people living nearby NTPC's plants.
An example of highly effective corporate governance practices at yourCompany is the fact that your Company has been adjudged as the winner of the prestigiousCII-ITC Sustainability Award 2019 a great feat reflecting utmost transparency andintegrity and following sustainability practices diligently.
Coal mining has been another important area your Company is activelypursuing to reduce its dependence on coal suppliers optimize the cost of generationensuring maximum dispatch of power and thereby increasing generation share.
In FY20 your Company extracted 11.15 MMT of coal from its captivemines registering an increase of 52.5% over previous year. Coal production has started atone more mine Talaipalli. With this three mines are under operation and miningoperations at two more mines are also in advanced stage. To further speedup the miningactivity a separate mining subsidiary NTPC Mining Limited has been incorporated. By2030 your Company is aiming to meet 40% of its coal requirement from captive mines.
Pursuing inorganic growth path your Company acquired Governmentof India's stake in NEEPCO and THDC which gave access to 3294 MW capacity out ofwhich 2625 MW is hydro and 142 MW renewables. The acquisition helps your Company inbalancing its portfolio.
Your Company has also participated in bidding for acquisition ofstressed assets admitted through NCLT and has emerged as winner in 600 MW Jhabua bid. Itis expected that the transaction will be completed soon.
In its endeavor to become a 130 GW Company by 2032 your Company hasenvisaged an aggressive capital expenditure plan which is also aligned with the NationalInfrastructure Pipeline of the Government of India. An action plan has been prepared byyour Company for capital expenditure of over Rs1 lakh crore for the period of 2019-2024.Your Company has adopted a dynamic debt strategy for raising long term debt at optimalcost for meeting its capital requirement. Your Company is also putting emphasis on aproactive refinancing strategy to leverage the market conditions for availing low costdebt. The success of this strategy can be gauged by the decreasing weighted average costof borrowings which stood at 6.81% for FY20 and is expected to reduce further. In FY20your Company mobilized external commercial borrowings of JPY Equivalent to USD 750Million which was the largest ever syndicated JPY loan raised by any Indian Corporatefrom offshore Samurai loan market under automatic route of RBI and also the highest eversingle foreign currency loan raised by your Company.
Many power sector reforms are being introduced by the Government forbringing efficiency and discipline in the sector. Along with this new market mechanismdesigns have been under discussion to promote competition thereby providing affordablepower to the consumers.
Real Time Market (RTM) has been introduced w.e.f June 01 2020. Withthis generators will get opportunity to sell the on-bar surplus power and Discoms willget opportunity to meet any incremental power requirement. This scheme will provide thegenerators an opportunity to dispatch more power and at the same time generate additionalrevenue.
With the success of Security Constrained Economic Dispatch scheme onpilot basis the scheme has been further extended till March 2021 covering all the willinggenerators so that the cheaper power will be scheduled first. This will ensure optimaldispatch in the country benefitting the customers.
Under Atmanirbhar Bharat Abhiyan the government has facilitatedDiscoms with loans for clearing their dues of the generators. This is a mutuallybeneficial scheme as it will reduce the interest liability of the Discoms and at the sametime increase the liquidity for the generators.
These are expected to bring positive changes and help in long-termsustainability of the power sector.
New Business Areas:
Your Company is actively pursuing new business areas and exploringvarious options for diversification of its business operations to maintain the growthtrajectory. Your Company is actively pursuing green hydrogen portfolio which aligns wellwith NTPC's large renewable growth plans. Your Company is working with variousagencies who are pioneers in hydrogen technology and aims to have a significant share inhydrogen economy. Your Company is focusing on carbon free mobility solutions including EVcharging EV transportation / Hydrogen FCEV transportation. Your Company is also activelylooking at power distribution Waste-to-Energy Consultancy Business and increasing globalfootprint. With acquisition and participation in the bidding process for stressed assetswe have opened a new avenue for growth.
Your Company is taking various digital initiatives to simplify variousprocesses bring efficiency speed and transparency. PRADIP (e-office) has been launchedfor faster processing transparency and to avoid paper consumption. Your Company is alsoconsidering AI/ML tools for power plant operation to increase efficiency safety costoptimization and reduce downtime.
Your Company is actively considering increasing geo-strategic reach.Offices were opened in Myanmar and Kenya. With this your Company has started operationsin three countries abroad.
I am pleased to inform you that your Company has received ProjectManagement Consultancy contacts for setting up of solar projects at Togo and Mali throughInternational Solar Alliance (ISA). Discussions are also underway with various countriesfor setting up solar capacity up to 10 GW through ISA platform. Your Company is activelylooking at the Middle East and African continent for business opportunities. Agreementswere made with various countries for cooperation in the power sector and it is expectedthat we would be able to materialize few contracts.
Since inception your Company has maintained leadership in all aspectsof power generation business. Your Company is working on adopting the latest tools andtechnologies to maintain leadership.
Needless to mention that the competition has become part of yourCompany's culture. Your Company is continuously working on increasing market share toretain leadership. Steps are being taken for bringing cultural changes to respond quicklyto changes in the power sector. Tireless efforts are underway for maximizingprofitability. Steps have been taken for eliminating under recovery by ensuring fuelavailability and controlling equipment forced outage. Various optimization andtechnological measures are being taken for resource utilization and keeping expenses undercontrol. On behalf of the NTPC family I assure you that your Company will continue to puttireless efforts for maximizing profitability and bring value to its shareholders. I onceagain assure you that your Company has a great future ahead.
I take this opportunity to place on record my sincere thanks andgratitude to the Government of India particularly Ministry of Power Ministry of CoalMinistry of Railways Ministry of Environment Forest and Climate Change Ministry of Newand Renewable Energy DIPAM CERC CEA CAG State Governments our valued CustomersAuditors Vendors other authorities and agencies that provide unstinted support. I conveymy appreciation to my colleagues on the Board for their invaluable contribution instrengthening the Company. I express my special thankfulness to the investors andshareholders for their sustained support to the Company.
With best wishes
|Yours sincerely |
|(Gurdeep Singh) |
|Chairman & Managing Director |