Report Prepared by Salman Hashmi

Central institutions such as NTPC and the SEBs - State

Electricity Boards continue to dominate the power
sector in India. The nation has adopted a blend of hydel,
thermal and nuclear sources with an aim to increase the
availability of electricity. Thermal plants account for
about 60 per cent of the total power generation capacity
in the country, followed by hydro-electricity (15 per
cent share). The remaining comes from nuclear and
other renewable sources of energy.
Average T&D - transmission and distribution losses exceed 25 per cent of total
power generation. The T&D losses are because of variety of reasons - substantial
energy sold at low voltage, inadequate investment in distribution system, sparsely
distributed loads over large rural areas, improper billing and high pilferage.
Lack of coal supply was a major obstacle in the power sector until some time back.
Majority of power generation is through thermal power plants which utilises coal
as its raw material. In order to reduce the carbon emission, efforts are being made
to shift to renewable source of energy. The government has made an ambitious
plan to generate 100 GW of solar power capacity by the year 2022.

Power demand falls with rainfall:

The arrival of monsoon has resulted in decrease in power off take over the last
month. Year-on-Year (YoY) comparison might not be reflective of the sustainable
power demand trends, as last year the nation had received scanty rainfall. This
year, however, rainfall has largely been normal, leading to gloomy power demand
from agricultural and cooling demand. Some significant points are:
Last month, on an average, 12GW of generation capacity have started
working which had been backed down
There is a sharp surge in short-term exchange traded volumes, though JSW
Energy plants are still working in a suboptimal fashion

 Increase in international coal prices have resulted rise in e-auction prices as

well
NTPCs generation volumes didnt suffer as compared to other generators in
the current seasonally feeble quarter.

A soar in exchange volumes has been recorded on low

tariffs:
Recently, a trend in the short term power market is that exchange traded volumes IEX and PXIL have soared sharply with an average of 30 per cent YoY jump over
the last 6-9 months. This could be driven by average prices that have touched lows
of Rs.2.16 per unit, lowest in the last 5 years. Private IPPs with some open capacity
- Jindal Power, Derang, JP Nigrie, DB Power, among others located closer to coal

mines have been supplying in the exchange market apparently earning some
spread over their marginal costRs.1.8- 1.9 per unit.

Enforcing of UDAY - Ujwal DISCOM Assurance Yojna:

As witnessed in a recent UP state regulators tariff order to the state distribution
company, regulators now are setting multi-year tariffs based on commitments or
AT&C loss reduction targets, given by state discoms to the Centre as a part of the
UDAY MoU. Therefore, for the UP tariff set in the first year would have 21.7 per
cent loss billed to the end user and eventually come off to 16 per cent by 2019.
Uttar Pradeshs target for AT&C loss reduction is aggressive given historical
numbers31 per cent in FY14 and 26 per cent in FY15. NTPCs PLFs will be
impacted, to some extent, as we enter a seasonally feeble quarter for thermal
power. However, Power Grid is expected to have higher commissioning in the
coming quarters to meet full year targets. While JSW Energy plants await
finalization of PPAs to begin power supplies, delay in signing of the medium-term
PPA along with increasing coal prices could translate that current quarter earnings
might be at risk. (Refer to Table 4 & 5).

Future comings:
CERC (Central Electricity Regulatory Commission) order on Adani Power and
Tata Power for relief to be provided because of change in law for the Mundra
plants.
SBD - Standard Bidding Documents for bidding of Ultra Mega Power Projects
(UMPPs) on imported coal to be cleared by the Indian government.
PPAs:
- Long term 15-yr UPPCL - UP Power Corporation bidding for 3,800MW, UP
is said to have received bids citing Rs.3.9-5.5 per unit. Against the tender
requirement of 3,800 MW, the state received bids of 6,652 MW.
- 1000 MW medium term three-year PPA by JSW Energy is one of the
lowest bidders for 750 MW capacity. The company awaits clearance from
the regulator for this medium term PPA.
Annual retail tariff orders are to be effected by a few key states -Rajasthan,
Delhi, Tamil Nadu, Haryana and Maharashtra.
More states to join UDAY (Ujwal DISCOM Assurance Yojna): Of the total 18
states and a Union Territory which have in principle agreed, 16 have signed
MoUs with MoP - Ministry of Power. The latest one to join the bandwagon
were Puducherry and Madhya Pradesh. More states are expected to join the
scheme. Approved by the Prime Minister Narendra Modi, and moved by the
Ministry of Power - Ujwal DISCOM Assurance Yojna (UDAY). UDAY provides
for the financial turnaround and revival of DISCOMs - Power Distribution
companies, and significantly also ensures a sustainable permanent solution
to the problem. It offers affordable and accessible 24x7 Power for All.

Conclusion:
Where all other sectors have shown 200-300 per cent growth, the power sector
has been the tortoise, slow and steady but ironically has lost the race. The
power companies have not given enough returns to boost growth in the power
sector. The latest weekly report below gives you a clear picture:

SL

INSTRUMENT
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5
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15

NAVA BHARAT
KALPATARU POWER
CESC
PTC
POWER GRID
TATA POWER
JSW ENERGY
NTPC
KEC
VOLTAMP
COFFEE DAY
GVK POWER
ADANI POWER
SJVN
TORRENT POWER

1W
-1.54
2.46
-4.76
0.18
0
-2.28
6.99
-0.75
-3.3
-0.32
-1.95
5.51
6.07
1.8
0.41

Movt Post
Budget
60.4
52.53
47.75
41.49
37.52
34.14
31.49
30.65
26.15
17.34
5.86
3.08
1.94
-0.7
-16.1

Disclaimer
The investment advice or guidance provided by way of recommendations, reports or other ways are solely the personal views of
the research team. Users are advised to use the data for the purpose of information and rely on their own judgment while making
investment decision.
Dynamic Equities Pvt. Ltd - SEBI Investment Advisory Reg. No.: INA300002022

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Article Written by
Salman Hashmi