The Central Electricity Regulatory Commission’s (CERC’s) order on temporarily increasing tariffs for Adani Power and Tata Power boosted investor sentiment. The CERC's act gives impetus for the optimism among power sector investors in recent times.
Brokerage reports say eight states, including Rajasthan, Uttar Pradesh and Tamil Nadu— whose power distribution companies, or discoms, are among the most indebted—have accepted New Delhi’s state electricity board’s debt restructuring programme announced in September. On the other hand, coal pooling is likely to be delayed as NTPC wrangles with Coal India on issues such as fuel quality and losses during transport. Note also that the tariff increases are yet to be implemented and will take some time in coming.
The 20,622 megawatts (mw) capacity addition in 2012-13 is about one-fifth lower than the previous year, but a dire coal scarcity problem meant factories were underutilized. The plant load factor (PLF) of coal and gas-fired power plants declined to 69.95% in fiscal 2013, a decadal low.
Power generation in the country increased only 1.71% in the March quarter, compared with a year ago, according to data from the Central Electricity Authority, or CEA. That is the worst performance in at least eight quarters despite capacity increasing 10 per cent from a year ago.
The only silver lining seems to be the decline in global prices of coal, which fell 18.5% from a year ago. However, the depreciating rupee meant the effective fall, in local currency terms, was only 11.5 per cent. It means for firms such as Tata Power and Adani Power, the March quarter could still mean losses or a decrease in profit.
Things are not easy even for NTPC, with ICICI Securities projecting a 12.7% fall in profit owing to lower PLF in its gas factories. In sum, while sentiment has improved a bit, the road to recovery is still long and painful.
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