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Power Sector
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Forward curve; buyers shying away from bilateral
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n In CERC's May 2011 report, more than price what’s important to note is 50%+ contracts are 'less than a week' and contract volumes are at just 18% of April month contract volumes
n This means buyers are shying away from entering into '1 week +' contracts. This we believe is after-effect of exchange prices being lower than bilateral prices for past one year
n Other observations – 1) 65% of volumes signed in May11 are at Rs3.58/unit, 5% volumes at Rs4/unit + and 2) Aug11 price prediction is Rs3.84/unit and Sep11 even lower at Rs3.58/unit.
n Foresee bilateral merchant prices heading towards avg. Rs3.5-3.7/unit in FY12E & Rs3.0-3.2/unit in FY13E (Rs4.7/unit in FY11); Use any upswings to reduce weights
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