The Hindu Business Line : NTPC plans power auctions from four new `merchant plants'

Sales strategy
The Korba, Farakka thermal stations and the Loharinagpala, Tapovan-Vishnugad hydro stations will be set up as `merchant plants'
Power to be sold through tariff-based bidding and not PPAs

New Delhi , Dec. 4

NTPC Ltd plans to auction nearly 70 per cent of the power to be generated from its four upcoming `merchant plants' to distribution utilities and industrial consumers ready to shell out the highest tariffs for designated `power blocks'.

The utility, which is planning a combined merchant capacity of 2,120 MW over the next five years, plans to offer electricity from these stations to buyers through a tariff-based bidding process for blocks ranging from 15 minutes to several weeks, company officials said.

NTPC, which currently sells power at an average cost of around Rs 1.60 per unit, hopes to rake in, according to conservative estimates, between Rs 5 and Rs 6 per unit from the sale of power from these plants, especially during peak hours. The company currently sells over 95 per cent of its generated power through long-term power purchase agreements (PPAs) signed with various State electricity boards.

During the Eleventh Plan period, NTPC will set up the 500-MW Korba and the 500-MW Farakka thermal stations and the 600-MW Loharinagpala and the 520-MW Tapovan-Vishnugad hydro stations as `merchant plants' - stations that are not tied-up to supply power through long-term PPAs but can instead sell to any buyer offering the highest price.

NTPC plans to take advantage of the open access norms for wheeling power from these `merchant plants'. While some of the power will be traded through the company's power trading arm, NTPC Vidyut Vyapaar Nigam Ltd, the majority is expected to be sold through tariff-based bidding, officials said.

Bidding route

Under the tariff-based bidding route, two different models are slated to be used. While one will be project-specific bidding, the other will be allocation of electricity to buyers on a power block basis. "Several SEBs have come forward with their interest in buying electricity on the power block basis," a company official said.

NTPC, which currently has an installed capacity of 26,194 MW, plans to expand its generation capacity to about 51,000 MW by 2012.

"While the tripartite agreement and improvement in cash flow of our customers have helped to keep our collections at 100 per cent level, we are looking at around five to seven per cent sale of energy to bulk customers over the next five years," an NTPC official said. The implementation of the Electricity Act 2003 has opened up several business opportunities for existing power sector players such as NTPC, including the possibility of direct supply to large customers, retail supply, distribution and power trading.

NTPC plans to capitalise on this by widening its customer base to include direct supply to big industrial houses, besides continuing to sell to the various SEBs.

The company is already setting up a power plant in Nabinagar in Bihar for supplying power exclusively to the Railways.

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