Prabhudas Lilladher has come out with its report on India Power Utilities sectors. The research firm are currently positive on hydro power companies on account of lower generation related risks (SJVN- BUY, NHPC- Accumulate).
Prabhudas Lilladher has come out with its report on India Power Utilities sectors. The research firm is currently positive on hydro power companies on account of lower generation related risks (SJVN- BUY, NHPC - Accumulate).
Power generation growth in FY12 at 8.05%: India’s Power generation in FY12 managed to grow by a mere 8.05% (876.4BUs), as 15.5% YoY growth in the installed capacity (FY12:200GWs) was lopsided towards the fag end of the 11th Plan (FY12). Out of the total generation, Thermal contributed 708BUs (81% to the total, and 6.5% YoY growth), while Hydro (130BU) contribution increased by 14.8% on account of 14% YoY growth in generation. Central coal utilities contributed 281BUs (up 3% YoY) and Hydro contributed 51BUs (up 10.8% YoY). The shortfall of 35BUs (gross) was mainly on account of a fuel shortages relating to coal and gas at 24.3BUs, delay in commissioning of plants (11BUs, down 18% YoY) and backing down on account of low schedule from beneficiary states (9.7BUs). However, 13.8BUs were generated additionally which led to a net shortfall of 21.2BUs. Nuclear-based station generated continued strong performance this year also at 32.3BUs, growing by 23% YoY and exceeding the target by 7.1BUs, mainly on account of improved fuel condition. Though capacity addition was highest in the Western region at 9GWs, overall generation growth in the Northern region (mainly due to higher Hydro generation along with higher capacity addition) was highest at 9.9% YoY and at 253.3BUs, it surpassed the target by 107%.
Thermal still lacks steam: Generation from coal-based stations exceeded their target of 577.7BUs by 1.2%, mainly on account of capacity addition. PLF of Coal and Lignite stations declined by 179bps and 296bps YoY to 73.5% and 70.8%, respectively, along with 170bps YoY decline in operational availability. Receipt of poor coal quality/quantity and low schedule from beneficiaries (for thermal and gas-based capacities) after increased hydro & nuclear generation, were the other reasons for reduction in generation.
Robust Hydro performance continues: Generation from Hydro stations at 130.4BUs exceeded their target by 18BUs, mainly on account of good monsoons. However, the energy content of many reservoirs was lower by 40% YoY. NHPC & BBMB were the best performing plants amongst the central utilities.
Gas plants bleed: PLF’s of the gas-based plant stood at 59.9%, a decline of 630bps YoY. The generation was lower as the domestic and agricultural demand dropped and cost of power was higher on account of costly and scarce fuel (loss of 9.5BUs in the current situation and 36BUs had they operated at 90% PLF). The total gas-based power generation stood at 93.3BUs as against 100.2BUs in FY11.
Sector Outlook- Time for a thaw? We are expecting capacity addition of nearly 13GWs in FY13E and 44GWs over the next three years which would bring down the deficit considerably. Similarly, the generation target for next year is pegged at 920BUs implying a modest YoY growth of 5% and factoring in fuel shortages, both for Thermal and Hydro. The sector ailing with higher imported fuel cost, domestic fuel shortages and weak SEB financials is now due for a booster dose. This has rendered generators currently cash-strapped with future projects in a fix. Revision in tariffs (to the extent of Rs0.6-0.8/KWhr) and relief packages to SEBs (converting loans into bonds) will help re-rate the sector. We are currently positive on hydro power companies on account of lower generation related risks (SJVN- BUY, NHPC- Accumulate) and in thermal sector, we would be positive on those players where the delta on account of fuel related risk is higher (Adani Power NR, Tata Power- Accumulate) as they would be the major beneficiaries of the relief measures.
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