NTPC has conveyed to the Union power ministry its intent of exiting from the loss making equipment manufacturing joint venture formed with Bharat Heavy Electricals in 2006, it was recently informed in Parliament.
NTPC-BHEL Power Projects Pvt Ltd (NBPPL), the 50:50 joint venture between NTPC and Bharat Heavy Electricals Ltd, has been consistently making losses since FY16.
The board of directors of BHEL, in its meeting in February 2018, accorded in-principle approval for pursuing up winding up of the joint venture. NTPC, it is learnt, has communicated a similar intention, subsequently.
The JV was formed way back in December 2007 but could start operations only in 2016. NBPPL has an expansive manufacturing site at Mannavaram in Chittor district of Andhra Pradesh. The JV was formed largely to undertake balance of plant and also EPC orders for thermal power projects. This would include auxiliary systems like coal handling plants, ash handling plants, water treatment plants, etc.
The rationale behind forming the JV was for NTPC to have a better control on order execution for its projects. There have been several instances where NTPC has alleged delays on the part of BHEL—its traditional supplier of main plant equipment and EPC contractor.
The prospects for coal-based power projects are generally very bleak and the order book position of NBPPL is far from encouraging. In fact, all through its existence, the NTPC-BHEL joint venture could bag only four orders (see table) worth Rs.2,717 crore and of this, the Rs.2,219-crore order for NTPC’s Unchahar plant in Uttar Pradesh was the most significant. Incidentally, this order was significant for NBPPL as it was completed in a record time of 26 months. This order was a comprehensive EPC order, unlike the three others that related largely to balance-of-plant works.
In February 2015, the JV signed an MoU with Andhra Pradesh Power Generation Company (APGenco), the state power generation utility, to supply spare parts of coal handling, ash handling plants and other balance of plant requirements for APGenco’s power plants. This MoU was then described as a “win-win situation” for both parties. APGenco was seen to benefit from this MoU as it would potentially ensure speedy sourcing of spares, leading to minimum downtimes for its operational power plants. The NTPC-BHEL JV set up facilities at its Mannavaram plant for power plant spares but there was not much progress in terms of serving APGenco, as envisaged in the MoU. Matters came to such a pass that NBPPL even invited other manufacturers to lease out its fabrication facilities.
The total investment in the Mannavaram plant, up to June 30, 2018, was around Rs.130 crore. Out of this, Rs.50 crore each was contributed by the two partners NTPC and BHEL, by way of equity.
It is interesting to observe that the entry of NTPC—a power producer—into power plant equipment was matched by equipment manufacturer BHEL’s entry into power production. BHEL had entered into an agreement with state power generation utility of Tamil Nadu to hold minority equity stake in the upcoming Udgangadi supercritical power plant. However, BHEL did not make much progress on this front. Similarly, NTPC’s entry into power generation equipment, through the JV with BHEL, is now mired in controversy. All said, NTPC will still have a presence in electrical equipment manufacture through its equity stake of around 45 per cent in Transformers & Electricals Kerala Ltd.