NHPC Ltd announces FY 2009 results: Nirmal Bang

NHPC is a hydroelectric power generating company dedicated to the planning, development and implementation of an integrated and efficient network of hydroelectric projects in India. The company executes all facets of the development of hydroelectric projects, from concept to commissioning.

NHPC has developed and constructed 13 hydroelectric power stations and the current total installed capacity of the company is 5,175 MW. This total installed capacity includes two power stations with a combined capacity of 1,520 MW, constructed and operated through the company’s subsidiary, NHDC (Narmada Hydroelectric Development Corporation). The power stations and hydroelectric projects are located predominantly in the North and North East of India, in the states of Jammu & Kashmir, Himachal Pradesh, Uttarakhand, Arunachal Pradesh, Assam, Manipur, Sikkim and West Bengal.

NHPC along with its subsidiary generated 16,582.72 MUs and 2,368.45 MUs of electricity, respectively, in FY 2009. During FY 09 NHPC and its subsidiary sold 14,587.88 MUs and 2345.01 MUs of electricity respectively. The company is presently engaged in the construction of 11 additional hydroelectric projects, which are expected to increase the total installed capacity by 4,622 MW.

NHPC is awaiting government sanction for a further five projects with an anticipated capacity of 4,565 MW. In addition, the company is also awaiting government sanction for certain joint venture projects with an anticipated capacity of 2,166 MW. Survey and investigation works are being carried out to prepare project proposal reports for nine additional projects, totaling 7,255 MW of anticipated capacity.

The total issue comprises of 167.73 Cr share with 111.83 crs shares for fresh issue and offer for sale of 55.91 cr shares. With the total issue the company plans to raise Rs 6038.6 Crs at higher price band.

Demand supply mismatch of power to continue over long period: India is amongst the fastest growing economics globally and has grown at an average rate of 8.5% per annum during the last five years. The Indian power sector has historically been characterized by energy shortages which have been increasing over the years. In the period from April 2009 to May 2009, peak energy deficit was estimated to be at 12.3% and normative energy deficit was estimated to be 8.9%. In addition to this due to inadequate supply and distribution infrastructure the per capita consumption of energy in India is extremely low in comparison to most other parts of the world. In the implementation of the last three five year plans, covering fiscal years 1992 to 2006, less than 50% of the targeted additional energy capacity was added. In current 5 yr plan also the net addition seems to be low by 25% as compared to planned. As such demand supply mismatch will continue for a long period.

Hydropower]A clean source of energy: ] NHPC is one of Indiafs leading hydropower generating company. Hydropower is a renewable source of energy that is more economical and less polluting and less damaging to the environment than most other forms of energy production. Developing hydropower enhances energy security and there is no fuel cost during the life of the project. Its generation is unaffected by issues concerning fuel supply, particularly the volatile price fluctuations which affect imported fuels. Hydroelectric power can be far less expensive than electricity generated from fossil fuels or nuclear energy. In a hydroelectric power station, energy is harnessed from water by running it from a higher height to a lower height and in the process, driving a hydro]turbine, which rotates an alternator to produce electricity. There is no waste product generated from this kind of electricity production and is therefore one of the cleanest form of electricity. In addition to clean energy NHPC may even benefit from carbon credit in the future.

Change in CERC Norms: Recently CERC has increased ROE of power plant from 14% to 15.5% (plus addition of 0.5% for timely completion of projects) which is applicable for the next 5 years starting 2009. This is likely to increase the profit of NHPC by 10]
15% in FY 10 and thereafter.

Longer Execution period & delay in project implementation: HydroPower projects have long gestation periods due to the process involved in commissioning power projects. There are number of difficulties inherent to development and construction of hydroelectric projects which includes geographical factors, land acquisition, forest clearance and cross border issues. All these factors are critical for the timely execution of hydroelectric power plant. The timely execution of the projects is very important for generating any kind of revenue.

Change in CERC Tariff Regulation: ] The tariff norms and regulations are subject to revision by the CERC and may be revised by it during the term of the respective PPAs. Any adverse changes in tariff norms or their interpretation by the CERC, judgments of the Appellate Tribunal for Electricity or the Supreme Court, or notifications by respective state governments relating to issues that affect hydropower generation, may have an adverse effect on operations and cash flow from operations.

Dependence on natural factors: ] Hydropower Electricity generation is heavily dependent upon water level present in dams. Due to low rainfall the water level in the dams may go down leading to low power generation. In addition to this the dams are also at high risk from natural calamities.