UNDERSTANDING THE BUSINESS STRATEGIES OF NTPC
Submitted To: DR. Neera Singh Submitted by: Hemang Janani(20) Chintan S. Modi(29) Divyesh Parmar(31) Vishal G. Patel(39) Vijay Shah(50) Raju M. Vashaveliya(58) 1 GRIMS VAPI
TABLE OF CONTENTS Topic
Page No
1. Scenario of Power Sector in India
3
2. Company Profile
4
3. NTPC Limited ( its Subsidiaries & Joint Ventures). 4. Organizational Structure of NTPC 5. Vision, Mission and Goals of NTPC 6. NTPC Core Values & Corporate objectives
13
7. Strategies of NTPC
12
8. SWOT Analysis of NTPC
18
9. Porter’s Five Force Model
20
10. Business Model of NTPC 11. Growth Drivers of NTPC
21
12. Competitors Overview
22
13. Bibliography
24
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SCENARIO OF POWER IN INDIA
Growth of economy calls for a watching rate of growth in infrastructure facilities. Power sector is one of the major aspects of this infrastructure building. Some prominent people like the Ex Chairman of GE Jack Welch have gone to the extent of saying, “you don’t have a chance to stand in the 21st century without lots of power without this you misses the next revolution.”
Moreover, the growth rate of demand for power in developing countries is generally higher than that of GDP. In India, the elasticity ratio was 3.06 in 1st plan, and peaked at 5.11 ‟ 80 s. For ‟ 90 s a ratio of around 1.5 was projected. during 3rd plan and came down to 1.65 in Hence, in order to support a growth of GDP of around 7% the rate of growth of power supply of 10%is required. If we look at current scenario, electricity consumption in India has more than doubled in the last decade, outpacing the economic growth. If we analyze the various statistics of Indian power sector, we will find that the generating capacity has gone up tremendously from a meager 1712MW in 1950 to a whooping 112000MW today.
Growth Over Years: installed capacity around the end of period:
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Generating capacity has grown manifold from 1,712 MW in 1950 to more than 112,000 MW today. At the same as a result of growing installed capacity, the power produced has also gone up. In 1950, the total power produced by Indian power sector was a meager 50BU and that is now 587.3BU. The Indian govt. emphasized the need of independence in power generation and in all subsequent five-year plans the allocated budget for power sector development was increased. But despite all these efforts by our govt., there is an acute power shortage in the country.
Profile of National Thermal Power Corporation Ltd. (NTPC) National Thermal Power Corporation Ltd. (NTPC) a global giant in the power sector was set up on 7th November 1975, with an objective to accelerate the electricity generation by planning, promoting and organizing integrated development of thermal power in India. Considering multidimensional opportunities in the energy sector, NTPC will adopt a multi-pronged growth strategy for capacity addition through Greenfield sites, expansion of existing stations, takeovers and joint ventures. The capacity addition plans that we have drawn up for the fifteen-year period using all the above strategies to enable the corporation to become a 40,000 MW company by 2012 A.D. The total installed capacity of the company is 30, 644 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 naptha/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 and around 1000 MW from Renewable Energy Sources (RES). NTPC has adopted a multipronged 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.
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National Thermal Power Corporation is the largest power generation company in India. Forbes Global 2000 for 2009 ranked it 317th in the world. NTPC is the largest power utility in India, accounting for about 20% of India’s installed capacity. It is third largest Indian companies with market cap of Rs.1778 billion. it has ranked 126th on the basis of market Cap 5 GRIMS VAPI
globally(Forbes 2009 data) it has a net worth of Rs. 574 billion and total assets of Rs. 1052 billion. In October 2004, NTPC launched its Initial Public Offering (IPO) consisting of 5.25% as fresh issue and 5.25% as offer for sale by Government of India. NTPC thus became a listed company in November 2004 with the government holding 89.5% of the equity share capital. The rest is held by Institutional Investors and the Public. The issue was a resounding success. NTPC is among the largest five companies in India in terms of market capitalization. The success of NTPC is the result of a modest but systematic beginning. NTPC known as the NAVRATANS of PSU’S have central govt. and the finding agencies as one of their major stakeholder. Railways are the major supplier of NTPC. If anything which is manufactured is to be sold out. In the same manner NTPC also has some of its buyers. The main buyers who purchase electricity from NTPC are; the state electricity board (SEB’S) and the state govt.
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Organization Structure of NTPC Chairman & Managing Director
Director (HR)
Director (Finance)
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Director (Projects)
Director (Operations)
Director (Commerce)
Director (Technical)
Executive Director (NR)
Executive Director (NR)
General Manager
Executive Director (NCR)
Executive Director (SR)
Executive Director (WR)
General Manager
General Manager
Organization structure includes three levels of management i.e. corporate level including top management, then region level comprising management of SBU regional level management & last as planning level management as GMs of various plants.
Vision: "A world class integrated power major, powering India’s growth, with increasing global presence." To realize this vision, NTPC has drawn up a detailed Corporate Plan for the period 19972012 which represents the company's collective optimism and enthusiasm, inspired by a glorious past, a vibrant present and a brilliant future. The Plan has been prepared in-house in consultation the committed, competent and confident members of the NTPC family. The road map that has been charted out was after a thorough scan of the strengths and weaknesses within the organization as well as opportunities and threats in the environment. 8 GRIMS VAPI
Mission: “Develop and provide reliable power, related products and services at competitive prices, integrating multiple energy sources with innovative and ecofriendly technologies and contribute to society.”
Make available reliable and quality power in increasingly large quantities at competi prices and ensure timely realization of revenues.
Adopt a broad based capacity portfolio including Hydro Power, LNG, Nuclear Power and non conventional and eco-friendly fuels Plan and speedily implement power projects using state-of- the art technologies. Be an integrated utility by implementing strategic diversifications in areas such as trading distribution, transmission, coal mining, coal beneficiation etc. Develop a strong portfolio of profitable technical services, generation assets etc.
businesses
in
overseas
markets
includi
Continuously attract and develop committed human resources to match world standa
Lead fundamental and applied research for adoption of the state-of-the-art technolog breakthrough efficiency improvements and new fuels. Lead developmental efforts in the Indian power sector including assisting state reform, policy recover etc. Be a socially responsible corporate entity with thrust utilization, community development, and energy conservation.
on
environment
protection,
Goal of Establishment:
To bridge the huge electricity supply-demand gap and the State Electricity Boards were not able to cope up with the situation. Achievements:
Sixth largest thermal power generator in the World and the Second most efficient util terms of capacity utilization.
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Contribution of NTPC in power generation: NTPC has contribution of 28% of tota power generation capacity of India.
NTPC’S CULTURE Core values are both intensely and widely shared Climate of high behavioral control Low employee turnover High agreement among the employees, for what NTPC stands for. All these point to the fact that strong cohesiveness, loyalty and organization commitment exist in NTPC lowering he attrition Rate.
Core Values – BCOMIT ‟ Known as one of the NAVRATAN S of the PSU’S NTPC has its following core values. They are known as (BCOMIT) as follows:-
Business Ethics 10 GRIMS VAPI
Customer Focus Organizational & Professional Pride Mutual Respect & Trust Innovation & Speed Total Quality for Excellence
CORPORATE OBJECTIVE BUSINESS PORTFOLIO GROWTH ‟ To further consolidate NTPC S position as the leading thermal company in India and establish a presence in hydro power segment.
power
generatio
To broad base the generation mix by evaluating conventional sources of energy to long run competitiveness and mitigate fuel-risks.
To diversify across the power value chain in India by considering backward and forw integration into areas such as power trading, transmission, distribution, coal mining, coal beneficiation, etc. To develop a portfolio of generation assets in international markets. To establish a strong brand in the domestic & international market CUSTOMER FOCUS
To foster a collaborative style of working with customer growing to be a preferred for supply of quality power.
To expand the relationship with existing customers by offering a bouquet of service addition to supply of power e.g. trading, energy consulting, distribution consulting, management consulting, management practices. To expand the future customer portfolio through profitable downstream business, inter alia retail distribution and direct supply.
diversification
To ensure rapid commercial decision making, using customer specific information adequate concern for the interests of the customer. AGILE CORPORATION 11 GRIMS VAPI
into
To ensure effectiveness in business decisions and responsiveness to change in the business environment by Adopting a portfolio approach to new business development. Continuous and coordinated assessment of the business environment to identify and respond to opportunities and threats.
To develop a learning organization having knowledge based competitive edge in curre and future businesses.
To effectively leverage information technology to ensure speedy decision making acro the organization. PERFORMANCE LEADERSHIP
To continuously improve on project execution time and cost in order to sustain long competitiveness in generation. To operate & maintain NTPC stations at par with the best-run utilities in the world respect to availability, reliability, efficiencies. To aim for performance excellence in the diversification businesses. To embed quality in all systems and processes. HUMAN RESORUCE DEVELOPMENT
To enhance organizational performance by institutionalizing an objective and ope performance management system. To align individual and organizational needs implementing a career development system.
and
develop
business
leaders
To enhance commitment of employees by recognizing and rewarding high performance. To build and sustain a learning organization of competent world-class professionals. To institutionalize core values and create a culture of team building, empowerment, equity, innovation and openness which would motivate employees and enable achievement of strategic objectives.
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FINANCIAL SOUNDNESS
To maintain and improve the financial soundness of NTPC by prudent management the financial resources.
To continuously strive to reduce the cost of capital through prudent managemen deployed funds, leveraging opportunities in domestic and international financial markets. To develop appropriate commercial policies remunerative tariffs and minimize receivables.
and
processes
this
would
ensur
To continuously strive for reduction in cost of power generation by improving opera practices. SUSTINABLE and DEVELOPMENT
To contribute to responsibilities.
sustainable
power
development
by
discharging
corporate
soci
To lead the sector in the areas of resettlement and rehabilitation and environ protection including effective ash-utilization, peripheral development and energy conservation practices. To lead developmental efforts in the Indian power sector through efforts at advocacy, assisting customers in the operations and management of power plants etc. RESEARCH and DEVELOPMENTS
To pioneer the adoption of reliable, efficient and cost-effective technologies by carry out fundamental and applied research in alternate funds and technologies. To carry out research and development of breakthrough techniques in power construction and operation that can lead to more efficient, reliable and environment friendly operation of power plants in the country.
To disseminate the technologies to other players in the sector and in the lon generating revenue through proprietary technologies.
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NTPC’S STRATEGIES
Technological Initiatives
Introduction of steam generators (boilers) of the size of 800 MW Integrated Gasification Combined Cycle (IGCC) Technology Launch of Energy Technology Center -A new initiative for development of technologies with focus on fundamental R&D The company sets aside upto 0.5% of the profits for R&D Roadmap developed for adopting Clean Development
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Corporate Social Responsibility
As a responsible corporate citizen NTPC has taken up number of CSR initiatives NTPC Foundation formed to address Social issues at national level NTPC has framed Corporate Social Responsibility Guidelines committing up to 0.5% of net profit annually for Community Welfare Measures on perennial basis
The welfare of project affected persons and the local population around NTPC proje are taken care of through well drawn Rehabilitation and Resettlement policies The company has also taken up distributed generation for remote rural areas Environment Management
All stations of NTPC are ISO 14001 certified Various groups to care of environmental issues The Environment Management Group Ash Utilization Division Forestation Group Centre for Power Efficiency & Environment Protection Group on Clean Development Mechanism NTPC is the second largest owner of trees in the country after the Forest department Partnering government in various initiatives
Consultant role to modernize and improvise several plants across the country Disseminate technologies to other players in the sector Consultant role “Partnership in Excellence” Programme for improvement of PLF of 15 Power Stations of SEBs. Rural Electrification work under Rajiv Gandhi Grameen Vidyutikaran Yojana
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Strengths of NTPC
SWOT ANALYSIS of NTPC
Largest market share in domestic power generation and a broad customer portfolio the country. Excellent track record of performance in project implementation and plant operation. Diversified thermal generation portfolio – multiple sizes and fuel types. Highly skilled and experienced human resources, exposed to state-of-the art technologies in project execution and power generation. Navaratna status High brand equity among shareholders. Strong balance sheet – ability to raise low cost debt. Engineering skills in project configuration and package design. Turnaround ability for old plants – demonstrated in the takeover plants of Talcher, Tanda & Unchahar. High credit rating that is indicative of the confidence of lenders. In-house training facility (PMI), CENPEEP, R&D etc that assist in development of sector.
Thrust on reducing social costs of capacity growth – strong execution of Resettlem and rehabilitation plans.
Weakness
Low risk-diversification of business portfolio consists primarily of generation assets. Poor financial health of customers. Functional orientation hampering cross functional perspective in decision making. Long and multi layered procurement process leading to long lead times and process delay. Fragmented IT architecture.
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Gaps in HR systems such as performance management, rewards and incentives career development.
Inadequate deployment of a strong knowledge management system that could ass improving efficiency and effectiveness in all aspects of the business.
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Hierarchy for decision making that affects responsiveness. Role ambiguity and dilution within different lends of the organization.
Opportunities
Expand generation capacities by putting up thermal and hydro capacities, maintaing position of a dominant generating utility in the Indian Power sector.
Broad base fuel mix by considering imported coal, gas, domestic coal, nuclear powe with a view to mitigate fuel risks and maintain long run competitiveness. Expand services for EPC, international markets.
R&M
and
O&M
activities
in
the
domestic
as
well
Backward integrate into fuel management to exercise greater control and understan of supply economics.
Lead the development and commercial deployment of non-conventional energy sour especially in the distributed generation mode. Improve collections by trading, direct sale to bulk customers and the active allocation in new plants. Execute increased number of power plants that classify for Mega Power Projects thereby reducing the cost of the projects and power and power generated. Forward integrate into the distribution business in India.
Threats
Limited experience of operating in a truly liberalized environment with competition. Limited experience of operating in an independently regulated system. Redirecting power may be constrained by inter-regional connectivity. Downward regulatory and competitive pressure on tariffs. Stringent norms for approval of increase in capital costs for projects in event of time overrun. Stringent environmental norms in the future may add to the cost of generation.
Absence of an independent regular for coal industry and the delay in private invest lending to the risk of low availability of coal in the future 18 GRIMS VAPI
Porter’s five force model
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Application of BCG matrix to NTPC NTPC is in the business of power generation. With a population of India increasing and the country on a road map towards development, the demand for electricity from various sectors will continue to be on increase. As a result of which power generation sector promises increasing returns to those who have already positioned themselves strongly in this sector. NTPC has been carrying on its operation since 1975 and has acquired a considerable share of country’s total electricity generation. The challenge for NTPC would be to continue to hold its large share in power generation sector. Thus NTPC strategies would fall under star of the BCG matrix. Its remain to be seen that in near future how NTPC will continue to dominate the energy and power generation sector. Here, when we talk of high growth we would like to say that NTPC would experience a high growth rate because it has a strong presence in this sector. It has withstood the onslaught of time and other pressure to position itself as a leading power producer in India.
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Business Model of NTPC
Business model of NTPC has been formed based on the strategies of NTPC. This included:
1. Cost efficiency i.e. providing power at reasonable prices so that they could provide power to all in need. 2. Eco friendly system: Driven by its commitment for sustainable growth of power, NTPC has evolved a well defined environment management policy and sound environment practices for minimizing environmental impact arising out of setting up of power plants and preserving the natural ecology. 3. Efficiency improvement includes both improvements in the existing process and through improvement in the technology used to increase the productivity of the company. Research & Development Centre is ISO 17025 accredited and provides high end scientific services to all the company’s stations as well as many outside stations resulting in improving availability and reliability of stations by providing condition assessment, failure analysis, solving and analyzing specific problems, and helping our stations in increasing the availability and reliability of their units.
4. Technology enhancement i.e. to stay in competition they have to continuously enhance their technology. 21 GRIMS VAPI
Growth Drivers of NTPC 1. Existing Energy Deficit
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2. Low Per Capita Consumption
3. Diversification and Inorganic Growth
Acquisition of 44.6% stake in TELK
For manufacturing equipment
and
repair
of
high
voltage
transformers
and
associate
Business collaboration and shareholders agreement signed with Govt of Keral and TELK Acquired 44.6% stake for Rs. 31.34 Crore subject to final adjustment based valuation of Assets. 23 GRIMS VAPI
JV with BHEL
“NTPC- BHEL Power Projects Private Ltd” started functioning as a 50:50 JV JV to manufacture and infrastructure projects in
supply
equipments
for
power
plants
and
othe
India and abroad CMD and two full time directors of the Company selected NTPC Board approved assigning implementation of 500 MW expansion of
Singrauli on turnkey EPC contract basis
BHEL has issued LOI for BOP works of 726 MW CCPP at Pallatana, Tripura and EPC works of 100MW CCPP at Namrup, Assam to NBPPL.
JV with Bharat Forge Ltd
JV to manufacture castings, forgings, fittings and pressure piping required power and other industries, balance of plant equipment for power sector “BF NTPC Energy Systems Ltd” incorporated, NTPC shall have 49% and BFL 51%
The Company is in the process of developing its comprehensive business mode
Setting up of Power Exchange
A JV Company has been incorporated with NHPC Ltd., PFC Ltd. and TCS Ltd under the name “National Power Exchange Limited” (NPEX) The JV Co. shall operate a Power Exchange at National level.
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NPEX to provide a neutral and transparent electronic platform for trading power on “day ahead basis” and ensure clearing of all trades in a transparent, fair and open manner with access to all players in the power markets. NTPC Ltd. & NHPC Ltd. will contributes 16.67% equity each, PFC Ltd. will contributes 16.66% of equity while TCS 50% equity in the share capital Obtained in-principle approval to set up and operate on July 1, 2009
Way Forward–An Integrated Power Major
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Competitors’ overview Tata Power
Tata power is India’s largest private sector power utility. Its revenues are $ 1 bn. Its Profit after tax is $ 137 mn. Its generation capacity is 2300 MW. Out of that in Mumbai, the capacity is 1800 MW. It has presence in generation, transmission and distribution of power. It supplies power to Mumbai and Delhi regions. Business strategy:
The core business of Tata Power Company is to generate, transmit and distribute electricity. The Company operates in two business segments: Power and Other services. The Power segment is engaged in generation, transmission and distribution of electricity. The other services segment includes electronic equipment, broadband services, and project consultancy and oil exploration.
Reliance Energy 26 GRIMS VAPI
Reliance Energy Ltd (REL) formerly known as Bombay Suburban Electric Supply (BSES) is a part of the Anil Dhirubhai Ambani Group. It is an integrated power utility company in the private sector in India which came into existence when it took over BSES in 2002. The company is the sole distributor of electricity to consumers in the suburbs of Mumbai. It also runs power generation, transmission and distribution businesses in other parts of Maharashtra, Goa and Andhra Pradesh. REL has significant presence in the field of execution of the Power projects on EPC (Engineering, Procurement and Commissioning) basis. CESC
CESC, a power utility in India was setup in 1899. CESC Limited is a flagship company of RPG Enterprises, which is one of India's well-managed groups of companies with a diversified presence. Company brought thermal power to India more than 100 years ago and supplies power to the city of Kolkata. Globalization initiatives
NTPC is keenly exploring opportunities to mark its footprints in different parts of the world. In line with its Globalization strategy, NTPC is making consistent efforts to enter the overseas markets and is focusing its efforts in the Middle East, Asia-Pacific and Africa regions for business. A Representative office is functioning in Dubai. A site has been identified for setting up a 2X250 MW coal based power plant in Trincomalee region, Sri Lanka in Joint Venture with Ceylon Electricity Board. Energy Audit of 15 Units of Saudi Electric Company has been successfully completed. Pursuant to signing of MoU with Government of Nigeria, our team is working on selection of prospective site for setting up one 700 MW Gas based and one 500 MW coal based power plant in Nigeria. In lieu of this, Government of Nigeria shall provide LNG for our stations.
Bibliography 1. www.ntpc.co.in 2. www.scribd.com 3. www.managementparadise.com 4. www.constructionupdate.com 5. www.reportlinker.com 6. www.assocham.org
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