Power :: IIFL: Q3 FY11 Sector Preview

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Power : IIFL: Q3 FY11 Sector Preview
 In the first two months of Q3FY11, India’s installed capacity increased by 2,242MW to attain the total
capacity 167GW. On yoy basis, the country’s generation capacity increased by 7% from 156GW in
Q3FY10.
 Capacity addition target for FY11 stands at 21GW, of which 15GW was scheduled for the first 3
quarters of FY11. 7,059MW capacity was added till November 2010 followed by commissioning of
500MW Korba unit-7 and 300MW Ratnagiri unit-2 in December 2010. We expect capacity addition to
accelerate in balance FY11 and FY12.
 During the quarter, generation increased to 199.5BU, 5.3% up from 189.4BU in Q3FY10. The increase
in generation is largely on account of capacity addition during the year. PLF dropped by 331bps to
72.8% YTD.
 Short term power prices continued to remain low in Q3FY11. Average price of electricity traded on the
power exchanges ranged between Rs1.9/Kwh to Rs3.0/Kwh during the quarter. Average price on
exchange dropped 36% from Rs3.7/Kwh in Q3FY10 to Rs2.3/Kwh in Q3FY11. Merchant power rates
for transactions through traders were around Rs4.0/Kwh, higher than the prices prevailing in the
exchanges.
 NTPC's generation during the quarter remained flat yoy at 54.7BU, although the capacity increased by
5% during the same period. Generation was lower due to poor coal supply. Going forward NTPC will
benefit from its operational efficiencies. As per tariff policy, NTPC has to step into the competitive
regime of bidding based tariff, moving out from the shell of cost plus earning. Ministry of Power has
also allowed NTPC to sell 150MW on non PPA basis.
 In Q3FY11, power generation was lower from Tata Power’s hydro and thermal power plants. The
company’s coal business is expected to grow with higher volume and increased realization.
 Power Grid’s execution of under construction projects will speed up with increased fund availability
after the FPO. We expect asset capitalisation to increase and the earnings to follow.