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Powering Chindia
Special report
Hungry elephant, bloated dragon
India, one of the world’s lowest per-capita electricity consumers, is hungry
for power, with 400 million people lacking access. China, on the other hand,
is bloated after a massive energy binge and will be forced to slow down and
concentrate on a more sustainable mix. While Beijing focuses on improving
its energy efficiency, India’s capacity additions are set to take off, with
consumption growth surpassing that of China over the next few years.
Chindia’s power challenges
‰ China and India’s power problems stem from their respective regulatory regimes.
‰ China controls power tariffs while coal prices are largely market determined, which
squeezes generation companies’ profits and is the root of current power shortages.
‰ The coal market is almost a monopoly in India, which has hampered growth.
‰ While generation firms earn healthy returns, distributors make big losses forcing
them to back down on power purchases, exacerbating India’s energy shortages.
China - The bloated dragon
‰ China will address power shortages via tariff reform, expanding inter-regional grid,
reducing energy intensity while improving its power mix.
‰ We expect power demand elasticity to contract from 1.46x to 0.85x by 2015.
‰ New capacity additions are likely to be stagnant. Solar power will witness the
highest growth as grid constrains wind power and slower addition of nuclear power.
India - The hungry elephant
‰ India’s power demand growth is set to pick up from a low base and surpass that in China.
‰ We believe that state utility losses in India can be contained. Indeed, some
provinces have increased tariffs by 5-20% in an effort to reduce distribution losses.
‰ Coal shortages are a worry. New projects based on domestic coal may only receive
70% of their needs from domestic mines, relying on imports to make up the shortfall.
Power stocks
‰ In India, we prefer utilities with higher coal security such as NTPC and Tata Power,
transmission utility PowerGrid and equipment suppliers BHEL and Crompton.
‰ In China, China Resources Power is the most efficient utility, while China Power
International is the cheapest. We like Shanghai Electric for its overseas growth
potential and solar stocks GCL Poly and Trina Solar.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Powering Chindia
Special report
Hungry elephant, bloated dragon
India, one of the world’s lowest per-capita electricity consumers, is hungry
for power, with 400 million people lacking access. China, on the other hand,
is bloated after a massive energy binge and will be forced to slow down and
concentrate on a more sustainable mix. While Beijing focuses on improving
its energy efficiency, India’s capacity additions are set to take off, with
consumption growth surpassing that of China over the next few years.
Chindia’s power challenges
‰ China and India’s power problems stem from their respective regulatory regimes.
‰ China controls power tariffs while coal prices are largely market determined, which
squeezes generation companies’ profits and is the root of current power shortages.
‰ The coal market is almost a monopoly in India, which has hampered growth.
‰ While generation firms earn healthy returns, distributors make big losses forcing
them to back down on power purchases, exacerbating India’s energy shortages.
China - The bloated dragon
‰ China will address power shortages via tariff reform, expanding inter-regional grid,
reducing energy intensity while improving its power mix.
‰ We expect power demand elasticity to contract from 1.46x to 0.85x by 2015.
‰ New capacity additions are likely to be stagnant. Solar power will witness the
highest growth as grid constrains wind power and slower addition of nuclear power.
India - The hungry elephant
‰ India’s power demand growth is set to pick up from a low base and surpass that in China.
‰ We believe that state utility losses in India can be contained. Indeed, some
provinces have increased tariffs by 5-20% in an effort to reduce distribution losses.
‰ Coal shortages are a worry. New projects based on domestic coal may only receive
70% of their needs from domestic mines, relying on imports to make up the shortfall.
Power stocks
‰ In India, we prefer utilities with higher coal security such as NTPC and Tata Power,
transmission utility PowerGrid and equipment suppliers BHEL and Crompton.
‰ In China, China Resources Power is the most efficient utility, while China Power
International is the cheapest. We like Shanghai Electric for its overseas growth
potential and solar stocks GCL Poly and Trina Solar.
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