India’s power industry is one that has always been dogged by controversy and crises, and the last fiscal was no different. NTPC was no exception, and had to battle fuel shortages and delayed payments. But, despite the adverse environment, the public sector company managed to achieve the highest ever capacity addition in a single year of 4,170 MW — backed largely by the momentum it had gained over the past two years — and made it to the No. 8 slot in the BW 500 list. India’s largest power generator, along with its 22 joint venture and five subsidiary firms, accounted for 27 per cent of the total power generated in the country.In FY13, NTPC’s profit after tax (PAT) rose 28 per cent over the previous year. “The additional revenues we generate over the regulatory norms are due to our efficiency, experience and strength of specialised manpower, and our corporate and financial management,” says NTPC CMD Arup Roy Choudhury. Among the handful of Maharatna firms, NTPC remains among the cheapest power producers, with a generation capacity touching 41,187 MW. It also has 20,064 MW of capacity under construction. The fact that NTPC (by virtue of being a public sector unit) is paid on the basis of its installed capacity and not on the power generated/sold — like its private counterparts — explains its 5 per cent increase in revenues over the previous year. This, after it suffered a near 10 per cent drop in generation due to the unwillingness of distribution companies to buy power (on account of increased costs) and fuel shortages. According to Roy Choudhury, currently there “is a lull because states are working on this (cost restructuring)... and demand will increase” soon.Things are also looking up with respect to its primary fuel provider, Coal India (CIL). Roy Choudhary says, “We have a foolproof fuel procurement plan to meet coal requirements.” This year, NTPC was allotted four new coal blocks in addition to the six under development. Three blocks that were earlier de-allocated were re-allotted to it in FY13. The firm awarded contracts for 8,521 MW of capacity this year, taking its capex to Rs 19,925.53 crore — up almost 25 per cent over last year. Its assets went up by 15 per cent, largely on account of its entry into the solar power sector. Looking to expand its footprint, the thermal power company is entering the hydropower segment — with its first plant scheduled for the coming financial year. It has also been appointed the nodal agency for providing power to Bhutan, while it has already started selling power to Bangladesh. NTPC has targeted 128 GW capacity by 2032, having already surpassed the 11th Five-Year Plan target by 390 MW.(This story was published in BW | Businessworld Issue Dated 04-11-2013)
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Three years ago, Hindustan Petroleum Corporation (HPCL) rolled out a short-term growth plan which has now begun to yield results. At number six in the BW Real 500 2012-13 rankings, HPCL’s total income increased from Rs 1,86,334 crore in FY12 to Rs 2,17,514 crore this year and, its profit after tax (PAT) was at Rs 500 crore, close to three times that of the previous year. This growth is significant considering consumption of petroleum products in India increased by only 5 per cent in 2012-13 and raw material costs for HPCL rose by Rs 6,239 crore over the previous year.“We decided to implement a short-term growth plan called Target Shikhar in 2010 with a focus on improving refining profitability, investments in new areas and operational efficiency. Its implementation has helped achieve growth over the past year,” says S. Roy Choudhury, chairman and managing director, HPCL. Analysts note that the move towards diesel price deregulation and increase in bulk diesel prices since January has helped oil marketing companies (OMC), including HPCL, improve their numbers in 2012-13. In the fourth quarter, HPCL’s earnings before interest, taxes, depreciation and amortisation (Ebitda) were Rs 860 crore as against analysts’ estimates of a loss of Rs 680 crore, due to inventory and exchange gains. They note that a gross refining margin (GRM) of $2 for FY13 was lower than the previous year ($3), driven by inventory loss in the first quarter of the year. “The company reported GRM of $3.7 per barrel in Q4 FY13, lower than our estimate of $4.6/barrel and the GRM for FY13 came at $2.1/barrel against our expectation of $2.6/barrel,” note Mayur Matani and Nishit Zota, analysts with ICICI Securities. HPCL, which aims to achieve 42 million metric tonnes (MMT) in marketing volume of total petroleum products by 2016-17, achieved sales of 30.32 MMT in 2012-13, 4.7 per cent higher than the previous year. HPCL now holds 20.19 per cent marketshare among public sector oil companies. The growth during the year was made possible by higher capacity utilisation at refineries and highest ever annual production of petroleum products like LPG, motor spirit (MS) and bitumen. Retail sales of petrol and diesel increased by 0.14 per cent during the year to help HPCL corner a 25.2 per cent marketshare. Its share in MS and high speed diesel also increased 0.14 per cent. As of 31 March 2013, HPCL’s domestic gas consumers stand at 395 lakh, an addition of 32.17 lakh during the year. To increase its rural penetration, HPCL commissioned 243 distributors under the Rajiv Gandhi Gramin LPG Vitaran Yojana, besides commissioning 54 regular distributors. HPCL’s focus on laying product pipelines to bring down transportation costs and its foray into wind energy have contributed to its performance.(This story was published in BW | Businessworld Issue Dated 04-11-2013)
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It’s been a good year for R.K. Singh, who stepped down recently as chairman and managing director of Bharat Petroleum Corporation (BPCL), handing over the reins to S. Varadarajan. In 2012-13, BPCL achieved its highest ever profit after tax (PAT) in a financial year — Rs 1,936 crore, which was nearly double of the Rs 851 crore PAT in the previous year. Powered by higher refinery throughput and sales, BPCL reported 14 per cent growth in gross revenue from Rs 2,13,596 crore in 2011-12. Its consolidated earnings before interest, taxes, depreciation and amortisation (Ebitda) margin improved to 3.4 per cent from 3 per cent. The performance was helped by better gross refining margins — $4.97 a barrel against $2.29 a barrel a year ago. In FY13, BPCL incurred under-recoveries of Rs 3,900 crore, most of which was reimbursed. BPCL’s refinery throughput was the highest in five years — 23.21 million metric tonnes (mmt) — as was the production of petroleum products — 21.84 mmt. Market sales volumes were 33.30 mmt, 6.4 per cent higher than the previous year. “All six major businesses continued to deliver strong results. Marketing of petroleum products remained the core strength,” said Singh to shareholders about the 2012-13 performance. Except for the Assam refinery, all others — at Mumbai and Kochi and the joint venture Bharat Oman Refineries — set new benchmarks in production. With a capacity utilisation of 109 per cent, the Mumbai refinery had a throughput of 13.10 mmt. Its gross refining margin improved to $4.67 per barrel from just $1.73 per barrel the previous year; and the overall gross margin to Rs 2,499 crore, from Rs 831 crore a year ago (partly due to the high rupee-dollar exchange rate).The Kochi refinery achieved a throughput of 10.1 mmt in 2012-13, compared to 9.56 mmt a year ago. The gross refining margin was $5.36 per barrel, amounting to Rs 2,211 crore in gross margins — the highest it has achieved in a single fiscal.BPCL’s retail sales volume climbed 9.6 per cent — the most among oil marketing companies. Higher retail diesel prices helped reduce under-recoveries. The company reported a throughput of 188 kilolitres per month — its best till now, and 20 per cent higher than the industry average. The loyalty programmes generated an all-time-high turnover of over Rs 18,000 crore. BPCL’s total LPG sales for the year stood at 3,884 thousand metric tonne, giving it a marketshare of 25.9 per cent. It enrolled 3.06 million new domestic customers, taking the customer base to 37.38 million by the end of the year. Varadarajan can surely look forward to a comfortable ride next year. (This story was published in BW | Businessworld Issue Dated 04-11-2013)
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Oil And Natural Gas Corporation (ONGC) keeps its No. 3 slot in the BW Real 500 rankings. This, despite a fall in profits, no major domestic discovery, a higher subsidy burden and the steep depreciation in the rupee vis-a-vis the dollar. “The factors which are in our control are far fewer than the factors which affect us. Crude oil prices fluctuate and our fortunes get affected. And, it is a paradoxical situation that when crude oil prices increase and we should be getting more, we worry that our subsidy burden will increase. And, when oil prices go down, we again worry because we have to shell out $56 per barrel in terms of subsidy; so, if oil prices go down and $56 is deducted, our net realisation reduces. However, even in this environment of uncertainty, we have done very well,” says Sudhir Vasudeva, chairman and managing director, ONGC.ONGC’s Enhanced Oil Recovery (EOR) and Improved Oil Recovery (IOR) schemes have helped it produce 79 million tonnes (mt) of oil and oil equivalent so far. Nearly 8 mt out of the total production of 58.71 mt last year came from EOR and IOR efforts. Another 110 mt was from marginal fields which the company is developing at a cost of Rs 26,000 crore. These marginal fields are expected to maintain production levels in the absence of any new discoveries.The PSU has its eyes trained on overseas assets. Its subsidiary ONCG Videsh (OVL) has picked up assets over the past year and ONGC expects that by 2030 more than 45 per cent of its production will come from OVL. The subsidiary contributes around 15 per cent of total production. The increasing subsidy burden is eating into the company’s profits. “Last year, our profit would have been Rs 49,400 crore but for the subsidy paid out. The total impact of this was close to Rs 28,000 crore on our net profit. This is now hurting us,” says Vasudeva. The company’s profit after tax fell from Rs 28,428.91 in FY12 to Rs 23,990.26 in FY13. The systematic deregulation of diesel prices has not helped reduce under-recoveries. It was around Rs 9.20 per litre in January. While the gap came down to Rs 3.20 in April, the rupee’s slide and problems in the Sudan and Syria have widened it again. The company is trying to contain costs to improve profitability. Almost 75 per cent of ONGC’s production comes from 15 fields which are old and where the cost of production is rising. “Our cost of production was about $38 a barrel last year and this is expected to go beyond $41 this year. However, through our efforts we have been able to contain this at $40 per barrel,” points out Vasudeva. The company will have to continue its balancing act and look overseas for assets if it wants to put up another good show next year. (This story was published in BW | Businessworld Issue Dated 04-11-2013)
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Former Coal Secretary P C Parakh, facing a CBI probe into alleged irregularities in coal block allocation, today triggered a storm by stating that Prime Minister Manmohan Singh had taken the final decision as head of the coal ministry and should also be named as a "conspirator" and made "accused" in the case."...if there is a conspiracy, then there are different members in this conspiracy. There is K M Birla who made the representation, he is one conspirator. I, who examined the case and made a recommendation, I can be another conspirator and the Prime Minister, who as the Coal Minister, took the final decision, is the third conspirator," Parakh told reporters here.""Therefore, if there is a conspiracy, all of us should be made accused," he addedAsked whether the PM should be named as the 'first conspirator', he said, "Must be. He is the final decision maker...responsibility lies with the Prime Minister as he could have overruled me. It was ultimately his responsibility as the Coal Minister."He said if the CBI thinks there is a conspiracy, "why did they choose and select Birla and me and not the PM. If conspiracy is there, then everyone is part of the conspiracy."CBI has registered FIR against industrialist Kumar Mangalam Birla, Parakh and others on charges of criminal conspiracy and under the provisions of the Prevention of Corruption Act in connection with alleged irregularities in the allocation of two coal blocks in Odisha eight years back.Terming the allocation to Hindalco of the Aditya Birla Group as a "fair decision", Parakh said Hindalco and PSU Neyveli Lignite Corporation had applied for a coal block.He explained that Screening Committee under the Coal Ministry decided that it should be allocated to Neyveli as it was a PSU and was also eligible for the allocation. But after the decision, Birla made a representation to the PM that Hindalco should have been given the block as they were equally competent and were the first applicant.Latching on to comments by Parakh, BJP and Left parties targeted the Prime Minister, saying he cannot escape responsibility in the controversial allocations as he held the charge of the Coal Ministry at that time.They demanded a fair and transparent probe into the issue."I found merit in the representation and suggested that Hindalco and Neyveli form a joint venture. My recommendation was approved by the Prime Minister," Parakh said.Asked if CBI omitted Prime Minister's name purposely, the former bureaucrat said, "This question should be asked to CBI on why his name is omitted."After registering the fresh FIR with a CBI court here, agency teams carried out coordinated searches at nearly six locations in Mumbai, Delhi, Hyderabad and Bhubaneshwar which included offices of Hindalco and residence of Parakh.Dubbing the allegation against him as baseless, Parakh said he saw nothing wrong in the government decision."There is absolutely nothing wrong with the decision. It was a very fair and correct decision that we took. I don't know why CBI thought that there is a conspiracy," he said.He also said then Minister of State in the Coal Ministry Darasi Narayana Rao must be named by the CBI as the files went through him.In reply to a poser, Parakh said he never faced any pressure from the Prime Minister's Office (PMO) over the issue of allocation of coal blocks Talabira II and Talabira III coal blocks in Odisha. "Lobbying by MPs, yes, but there was no pressure from the PMO," he said.Claiming that the CBI has failed to distinguish between "a fair and correct decision and a wrong decision", he said the agency has not appreciated the issues involved in the case."If CBI behaves like this, then people will find it difficult to take decisions, especially young officers. It should have a relook at the entire case and scrap it," he said.He said as Coal Secretary he had tried to make the coal block allocation process more transparent by recommending open auction and e-auction by amending the relevant Act.He claimed then Coal Minister Shibu Soren was opposed to the idea. But when he resigned from the government, the Prime Minister approved the idea and asked him to prepare a note for the Union Cabinet.Parakh said the PMO was opposed to bringing an ordinance to change the law and preferred bringing a bill in Parliament.CBI named 46-year-old Birla, Chairman of Aditya Birla Group, along with Parekh and unknown persons and officials of Hindalco and Coal Ministry in the FIR, the 14th in the multi-crore scandal, for alleged criminal conspiracy and under provisions of the Prevention of Corruption Act.(PTI)
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State-run explorer Oil and Natural Gas Corp said its overseas arm has agreed to buy an additional 12 percent stake in a Brazilian oil block from Brazil's Petrobras for $529 million.Petrobras had earlier agreed to sell its 35 per cent stake in the block to China's Sinochem Group for $1.54 billion, but the deal was subject to pre-emption rights of ONGC and Royal Dutch Shell.Shell is the operator of the block with a 50 per cent stake, while ONGC already owns 15 per cent of the block.Shell and ONGC Videsh served a pre-emption notice on September 17 to jointly acquire the 35 per cent stake, ONGC said in a statement to Indian stock exchanges on Monday.Reuters last month reported that the companies were planning to exercise their pre-emption right on the stake.(Reuters)
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State-run Indian explorer Oil and Natural Gas Corp (ONGC) aims to commence commercial drilling for shale gas next year, its chairman said."We hope to take up at least 10 wells for parameters this year and to start commercial drilling next year," Sudhir Vasudeva told reporters.India approved a policy to allow state-owned companies to start exploration for shale oil and gas last month, as the world's fourth-biggest energy consumer moves slowly to seek alternatives to expensive oil imports.Of about 356 blocks held by ONGC and Oil India, India's upstream regulator has said 176 could hold shale resources.India could be sitting on as much as 96 trillion cubic feet (tcf) of recoverable shale gas reserves, equivalent to about 26 years of its gas demand, according to the US Energy Information Administration.(Reuters)
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The unearthing of the allocation scam and the findings of the CAG have brought the coal industry to its knees. The spate of deallocations and the ongoing CBI probe that followed have played havoc with production and hit supply to power producers. A lowdown...Click here to view graphicCompiled by Moyna; Graphic by Prashant Chaudhary(This story was published in BW | Businessworld Issue Dated 21-10-2013)
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