May 23 (Bloomberg) -- NTPC Ltd., India’s biggest electricity producer, is considering building its first power plant to run completely on imported coal to prepare for local shortages and to take advantage of a fall in global prices.
The state-run generator is studying the option to set up a 2,400 megawatt plant in Pudimadaka in the southern state of Andhra Pradesh, Director Finance Kulamani Biswal said in an interview.
NTPC is weighing the plan amid delays in starting its first coal mine and Coal India Ltd., the nation’s monopoly coal producer, missing output targets. In addition, a drop in the international prices of thermal coal and rising domestic freight costs have narrowed the difference with imported fuel.
“Considering the challenges of railway logistics, such a plant would be crucial to our expansion strategy,” Biswal said. “Coal prices have been falling and we expect them to either fall further or remain at the same levels.”
Thermal coal prices at Australia’s Newcastle port have declined more than 15 percent in the past year, the fourth year of declines since their peak in 2010, because of oversupply in Australia and the U.S.
Coal India, which accounts for more than 80 percent of India’s production of the fuel, missed its output and sales targets for the year ended March 31. The company produced 462.5 million metric tons, falling short of its 482 million-ton goal. Sales were 471.5 million tons, 4 percent short of the target.
NTPC’s plans to produce coal from its own mines suffered a setback after it terminated a contract with Australia’s Leighton Holdings Ltd. to develop and operate the Pakri Barwadih mine in the eastern state of Jharkhand. The 230 billion-rupee ($3.9 billion) contract was scrapped after delays in execution, the utility said in a May 12 statement.
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