Improved coal availability is seen to reduce NTPC’s fixed cost under-recoveries to around Rs 200 crore in FY20 (a 75% fall), with the state-run power-generation behemoth recording better plant availability factor (PAF) amid low power demand. Power plants are contractually entitled to receive fixed costs for recovering capital expenses, even when buyers do not procure electricity from the units. However, the plants need to display a minimum PAF of 83% to claim the fixed costs. The average PAF of NTPC coal plants in FY20 increased by 4.5 percentage points annually to 90.2%.
Fixed cost represents pre-determined expenditure components, including debt service obligation and risk-free returns. “Accordingly, NTPC’s fixed-cost under-recovery is expected to decline to around Rs 200 crore in FY20 from Rs 800 crore in FY19 and Rs 380 crore in 9MFY20,” analysts at Emkay Global said in a recent note. However, the brokerage firm lowered its estimates of NTPC’s earnings per share for FY21 by 5.1% “to factor in low generation and a fall in the incentive income amid falling power demand”. Nevertheless, it has maintained a ‘Buy’ rating on NTPC factoring its risk-averse regulatory business model.
