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NTPC set to get nod to sell 10% power at market price

31 Dec 2009 Evaluate

The government plans to allow NTPC to sell around 10% capacity at market-determined prices, a move expected to boost the power utility’s profit by up to 40% and spiff up its valuation as it braces for disinvestment.

The power ministry has agreed to the proposal said a government official involved in the process, adding that the Cabinet Committee On Economic Affairs will take a final decision on the matter in the first fortnight of January 2010.

Under the present setup, 85% capacity of power generators like NTPC is sold to state electricity boards (SEBs) via long-term power purchase agreements (PPAs). But the fixed rates here are lower than market-set prices.

The Centre is free to give the remaining 15% to power-deficit states. It is part of this capacity that NTPC will be permitted to sell in the open market to bulk consumers like sugar mills, chemicals manufacturers and steel plants.

NTPC will be able to sell about 50% of the government’s unallocated quota in new plants and 25% unallocated generation capacity in existing ones at market rates known as merchant power, to open access consumers.

The move will enable NTPC to sell 2,500-3,000 mw, about 10% of its installed capacity of 30,644 mw, in the open market in the next two years. At present, power commands an open market price of Rs 6-9 a unit, while NTPC gets around Rs 1.80 per unit from SEBs.

Unlike private electricity producers, state-owned companies have to sell even untied power to SEBs at the same price. Even if NTPC were to sell 3,000 mw at Rs 4 per unit in the open market, it would bolster its bottomline by around Rs 3,000 crore which would be about 40% of the company’s current net profit of Rs 8,092 crore.

The move bolsters the government’s chances of getting a better price for the 5% NTPC stake that it is planning to sell off. The aim is to mop up Rs 11,000 crore at a substantial premium to the current market price of Rs 230 per share. The NTPC scrip has already gained by over 11% since December 14, when investment bankers were appointed for the divestment.

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NTPC Share Price

396.10 -1.80 (-0.45%)
21-Apr-2026 16:59 View Price Chart
Peers
Company Name CMP
NTPC 396.10
Tata Power 435.70
Adani Power 203.05
Power Grid Corp 319.30
Torrent Power 1622.05
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