Power News We love to talk!

NOV 24 2017

Power utilities: Tight supply yields limited earnings benefit

  • Economic Times, ET Bureau / Hyderabad
  • Created: Fri 24th NOV 2017

 

It has been a remarkable quarter for electricity producers. Prices in the short-term power market perked up and thermal power generation has noticeably risen as hydro and renewable power generation lagged. Total power generation was up 5.3%, compared with 1.4% in the year ago quarter. Utilization also noticeably improved.

But plant shutdowns and higher costs mean the benefits are not openly visible in earnings. Generation at JSW Energy Ltd, which is most exposed to the short-term power market among large firms, was down 2.5%. Still, thanks to better merchant realizations, higher other income and savings in operation and maintenance costs, operating profit before exceptional items rose 4%.

The financial numbers of NTPC Ltd and Tata Power Co. Ltd did not excite either. Revenues were largely unchanged and net profits were suppressed by adjustments and write-offs. Tata Power benefited from higher coal prices.

But higher coal prices also raised the fuel cost under recovery at the firm’s Mundra plant. The firm is looking to use lower grade coal options to contain costs.

Adani Power Ltd reported a profit, compared with a loss in the year-ago quarter. But as Nomura Research points out in a report, uncertainty about recovery of compensatory tariffs and debt servicing concerns cloud the stock’s outlook. That said, state-run NTPC stole the attention among power generators. The company is beginning to see the benefits of capacity additions. Power generation was up 7% as it capitalized around 3,300 megawatts (MW) of capacities in the first half of the current fiscal.

With the firm planning to add another 800MW in the rest of the fiscal, taking the total capacity additions to about 4,000MW (for FY18), analysts see strong earnings momentum in coming quarters. “Capitalization is expected to accelerate further in FY19 and FY20. We expect regulated equity CAGR (compound annual growth rate) of ~20% over FY17-20E. PAT (profit after tax) is estimated to grow at ~14% CAGR in FY17-20E,” Motilal Oswal Securities Ltd said in a note.

Tags

TOTAL Adani Enterprise Limited JSW Steel Ltd. Adani Power Ltd JSW Energy Ltd Coal Power Generation NTPC Ltd Energy Nomura Tax Short-term power market Power power market Tata Power Electricity TATA

Related News

  • Rs 5-lakh cr investment in power generation by FY17: Jyotiraditya Scindia  Read more
  • Air pollution shrouds Indias solar success, says new research  Read more
  • Power output up 10% in April-February 2015  Read more
  • Power ministers' meet adds cyber security, digital payment to agenda  Read more
  • Is the feed-in solar tariff in TN too high?  Read more
  • Get ready, green Metro stations coming  Read more
  • Fuel linkages for 78k-Mw capacity to be in place by Sept  Read more
  • JSW Energy to buy hydropower plants from Jaiprakash Power: Reports  Read more
  • Muted coal production no barometer for power sectors health: power ministry  Read more
  • German firms to help renewable energy sector in Punjab  Read more