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SAPM-Assessment

Mini Project (Total Marks: 20)

You are required to prepare an analytical report on the given corporate stock, with the followingcomponents:

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1. Brief industry analysis (the industry to which the company belongs)-2 pages

A thermal power station is a power plant in which the prime mover is steam driven. Water is heated, turns into steam and spins a steam turbine which either

drives an electrical generator or does some other work, like ship propulsion. After itpasses through the turbine, the steam is condensed in a condenser and recycled towhere it was heated; this is known as a Rankine cycle. The greatest variation in thedesign of thermal power stations is due to the different fuel sources. Some prefer touse the term energy center because such facilities convert forms of heat energy into electrical energy

Introductory overview

Almost all coal, nuclear , geothermal, solar thermal electric, and waste incineration plants, as well

as many natural gas power plants are thermal. Natural gas is frequently combusted in gas

turbines as well as boilers. The waste heat from a gas turbine can be used to raise steam, in acombined cycle plant that improves overall efficiency. Power plants burning coal, oil, or natural

gas are often referred to collectively as  fossil-fuel power plants. Some  biomass-fueled thermal

 power plants have appeared also. Non-nuclear thermal power plants, particularly fossil-fueled plants, which do not use cogeneration are sometimes referred to as conventional power plants.

Commercial electric utility  power stations are most usually constructed on a very large scale and

designed for continuous operation. Electric power plants typically use three-phase or individual-

 phase electrical generators to produce alternating current (AC) electric power at a frequency of 50 Hz or 60 Hz (hertz, which is an AC sine wave per second) depending on its location in the

world. Other large companies or institutions may have their own usually smaller power plants to

supply heating or electricity to their facilities, especially if heat or steam is created anyway for other purposes. Shipboard steam-driven power plants have been used in various large ships in the

 past, but these days are used most often in large naval ships. Such shipboard power plants are

general lower power capacity than full-size electric company plants, but otherwise have many

similarities except that typically the main steam turbines mechanically turn the propulsion propellers, either through reduction gears or directly by the same shaft. The steam power plants

in such ships also provide steam to separate smaller turbines driving electric generators to supply

electricity in the ship. Shipboard steam power plants can be either conventional or nuclear; theshipboard nuclear plants are mostly in the navy. There have been perhaps about a dozen turbo-

electric ships in which a steam-driven turbine drives an electric generator which powers an

electric motor for  propulsion.

In some industrial, large institutional facilities, or other populated areas, there are combined heat 

and power (CHP) plants , often called cogeneration plants, which produce both power and heat

for facility or district heating or industrial applications. AC electrical power can be stepped up to

very high voltages for long distance transmission with minimal loss of power. Steam and hotwater lose energy when piped over substantial distance, so carrying heat energy by steam or hot

water is often only worthwhile within a local area or facility, such as steam distribution for a ship

or industrial facility or hot water distribution in a local municipality.

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History

Reciprocating steam engines have been used for mechanical power sources since the 18th

Century, with notable improvements being made by James Watt. The very first commercialcentral electrical generating stations in New York and London, in 1882, also used reciprocating

steam engines. As generator sizes increased, eventually turbines took over.

2. Brief background of the company-2 pages

NTPC Limited (Formerly National Thermal Power Corporation) ( NSE:  NTPC) is the largeststate-owned power generating company in India. Forbes Global 2000 for 2009 ranked it 317th [3]

in the world. It is an Indian  public sector company listed on the Bombay Stock Exchange 

although at present the Government of India holds 84.5%(after divestment the stake by Indiangovernment on 19october2009) of its equity. With a current generating capacity of 31134 MW,

 NTPC has embarked on plans to become a 75,000 MW company by 2017. It was founded on

 November 7, 1975. NTPC's core business is engineering, construction and operation of power generating plants and

 providing consultancy to power utilities in India and abroad.

The total installed capacity of the company is 31134 MW (including JVs) with 15 coal based and

7 gas based stations, located across the country. In addition under JVs, 3 stations are coal based& another station uses naphtha/LNG as fuel. By 2017, the power generation portfolio is expected

to have a diversified fuel mix with coal based capacity of around 53000 MW, 10000 MW

through gas, 9000 MW through Hydro generation, about 2000 MW from nuclear sources andaround 1000 MW from Renewable Energy Sources (RES). NTPC has adopted a multi-pronged

growth strategy which includes capacity addition through green field projects, expansion of existing stations, joint ventures, subsidiaries and takeover of stations.

 NTPC has been operating its plants at high efficiency levels. Although the company has 18.79%of the total national capacity it contributes 28.60% of total power generation due to its focus on

high efficiency. NTPC’s share at 31 Mar 2001 of the total installed capacity of the country was

24.51% and it generated 29.68% of the power of the country in 2008-09. Every fourth home in

India is lit by NTPC. 170.88BU of electricity was produced by its stations in the financial year 2005-2006. The Net Profit after Tax on March 31, 2006 was INR 58,202 million. Net Profit after 

Tax for the quarter ended June 30, 2006 was INR 15528 million, which is 18.65% more than for 

the same quarter in the previous financial year. 2005).

Pursuant to a special resolution passed by the Shareholders at the Company’s Annual General

Meeting on September 23, 2005 and the approval of the Central Government under section 21 of 

the Companies Act, 1956, the name of the Company "National Thermal Power Corporation

Limited" has been changed to "NTPC Limited" with effect from October 28, 2005. The primaryreason for this is the company's foray into hydro and nuclear based power generation along with

 backward integration by coal mining.

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• Products/business portfolio -2 pages

(1) Coal Based Power Stations

With 15 coal based power stations, NTPC is the largest thermal power generating company in the country.

The company has a coal based installed capacity of 25,375 MW.

COAL BASED(Owned

by NTPC)STATE

COMMISSIONED

CAPACITY(MW)

1. Singrauli Uttar Pradesh 2,000

2. Korba Chhattisgarh 2,100

3. Ramagundam Andhra Pradesh 2,600

4. Farakka West Bengal 1,600

5. Vindhyachal Madhya Pradesh 3,260

6. Rihand Uttar Pradesh 2,000

7. Kahalgaon Bihar 2,340

8. NCTPP, Dadri Uttar Pradesh 1,820

9. Talcher Kaniha Orissa 3,000

10. Feroze Gandhi, Unchahar Uttar Pradesh 1,050

11. Talcher Thermal Orissa 460

12. Simhadri Andhra Pradesh 1,000

13. Tanda Uttar Pradesh 440

14. Badarpur Delhi 705

15. Sipat-II Chhattisgarh 1,000

Total 25,375

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Coal Based Joint Ventures:

COAL BASED

(Owned by JVs)STATE

COMMISSIONED

CAPACITY

1. Durgapur West Bengal 120

2. Rourkela Orissa 120

3. Bhilai Chhattisgarh 574

4. Kanti Bihar 110

Total 924

(2) Gas/Liquid Fuel Based Power Stations

The details of NTPC gas based power stations is as follows

 

GAS BASED

(Owned by NTPC)

STATECOMMISSIONED

CAPACITY(MW)

1. Anta Rajasthan 413

2. Auraiya Uttar Pradesh 652

3. Kawas Gujarat 645

4. Dadri Uttar Pradesh 817

5. Jhanor-Gandhar Gujarat 648

6. Rajiv Gandhi CCPP Kayamkulam Kerala 350

7. Faridabad Haryana 430

Total 3,955

Gas Based Joint Ventures:

COAL BASED (Owned

by JVs)STATE

COMMISSIONED

CAPACITY

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1. RGPPL Maharashtra 1940

Total 1940

(3) Hydro Based Power Projects (UnderImplementation)

NTPC has increased thrust on hydro development for a balanced portfolio for long term sustainability. The

first step in this direction was taken by initiating investment in Koldam Hydro Electric Power Project located

on Satluj river in Bilaspur district of Himachal Pradesh. Two other hydro projects under construction are

Tapovan Vishnugad and Loharinag Pala. On all these projects construction activities are in full swing.

 

HYDRO BASED STATEAPPROVED

CAPACITY(MW)1. Koldam (HEPP) Himachal Pradesh 800

2. Loharinag Pala (HEPP) Uttarakhand 600

3. Tapovan Vishnugad (HEPP) Uttarakhand 520

Total 1,920

• Market structure and competitive profile of the company (key factors) and future

 prospects -3 pages

Power Generation

PresentlPresently, NTPC generates power from Coal and Gas. With an installed capacityof 32,194 MW, NTPC is the largest power generating major in the country. It hasalso diversified into hydro power, coal mining, power equipment manufacturing, oil & gas exploration, power trading & distribution. With an increasing presence in the power

value chain, NTPC is well on its way to becoming an “Integrated Power Majory, NTPCgenerates power from Coal and Gas. With an installed capacity of 32,194 MW, NTPC isthe largest power generating major in the country. It has also diversified intohydro power, coal mi

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ning, power equipment manufacturing, oil & gas exploration, power trading & distribution. With an increasing presence in the power value chain, NTPC is well on itsway to becoming an “Integrated Power MajorPresently, NTPC generates power fromCoal and Gas. With an installed capacity of 32,194 MW, NTPC is the largest powergenerating major in the country. It has also diversified into hydro power, coalmining, power equipment manufacturing, oil & gas exploration, power trading & distribution. With an increasing presence in the power value chain, NTPC is well on itsway to becoming an “Integrated Power Major.

3. Financial performance analysisDATA 2007 DATA 2008

Return on

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Equity11.63 11.23

Book Value

Per Share

59 66

Earnings per 

share686.5 741.4

Dividends

 payout ratio

0.38 0.38

CAGR 

(Sales)

12.30

CAGR (Eps)

12.43

Sustainable

Growth ratio

ROE

11.63 (1-0.38) 7.21 11.23 (1-

o.38)

6.96

P/E ratio

0.20 0.26

DATA 2009 DATA 2010

Return on Equity 11.55 11.33

Book Value Per 

Share71 77

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Earnings per 

share820.1 872.8

Dividends payout

ratio

0.36 0.35

Sustainable

Growth ratio

ROE11.55 (1-0.36) 7.39 11.33 (1-

0.35)

7.36

P/E ratio0.21 0.23

• Analysis of recent trends (2006-07-2009-10) in financial performance (based on ratiosdiscussed in class)

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Projected financials for next 3-year period

Future Goals

The company has also set a serious goal of having 50000 MW of installed capacity by 2012 and75000 MW by 2017. The company has taken many steps like step-up its recruitment, reviewing

feasibilities of various sites for project implementations etc. and has been quite successful till

date.

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Future Capacity Additions

NTPC has formulated a long term Corporate Plan upto 2017. In line with the Corporate Plan, the capacity

addition under implementation stage is presented below:

PROJECT STATE MW

Coal

1. Indira Gandhi STPP- JV with IPGCL & HPGCL ( 3 x 500) Haryana 1500

2 Korba III ( 1 x 500) Chhattisgarh 500

3 Sipat I (3 x 660) Chhattisgarh 1980

4. Farakka III ( 1 x 500) West Bengal 500

5. Simhadri II ( 2 x 500) Andhra Pradesh 1000

6. Vallur I -JV with TNEB ( 2 x 500) Tamilnadu 1000

7. Vallur Stage-I Phase-II -JV with TNEB ( 1 x 500) Tamilnadu 500

8. Bongaigaon(3 x 250) Assam 750

9. Mauda ( 2 x 500) Maharashta 1000

10. Rihand III(2X500) Uttar Pradesh 1000

11. Vindhyachal-IV (2X500) Madhya Pradesh 1000

12. Muzaffarpur Expansion (2x195) – JV with BSEB Bihar 390

13. Nabinagar TPP-JV with Railways (4 x 250) Bihar 1000

14. Barh II (2 X 660) Bihar 1320

15. Barh I (3 X 660) Bihar 1980

Hydro

1. Koldam HEPP ( 4 x 200) Himachal Pradesh 800

2. Loharinag Pala HEPP ( 4x 150) Uttarakhand 600

3. Tapovan Vishnugad HEPP (4 x 130) Uttarakhand 520

Total 17340

 

4. Valuation of the stock (use D/P ratio or P/E Ratio to calculate Ke)

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5. Technical analysis-chart for period 2005-2010

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One Year Technical Chart for NTPC Ltd.

6. Investment arguments and recommendations

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Mention all names of references used-Books and websites used for data

collection