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UBS Investment Research
India Power Utilities
11 coal blocks de-allocated in one month
„ Event: coal ministry has de-allocated 11 blocks for power companies
According to a release from the coal ministry, the government has de-allocated 11
coal blocks, which were allotted for power generation. The companies that have
been affected by the de-allocation are: NTPC (five blocks), APGENCO (three),
Jharkhand SEB, Damodar Valley Corporation and Baidyanath (one each). Overall,
government companies (10 out of 11 blocks) have been impacted the most.
„ Impact: scrutiny on non-development of coal blocks likely to increase
We believe that the government is becoming more serious on the issue of nondevelopment/slow progress on the blocks that were allocated to the companies.
Although there are concerns that the process of de-allocation has not been
consistent, there is little doubt that the development of captive blocks has not been
fast. This cancelation of blocks would be a positive for the sector because we
believe the companies may become more proactive on timely development of
captive blocks.
„ Action: we prefer companies with low fuel supply risk
We believe the impact on NTPC would be limited as the company operates on fuel
cost pass-through basis, which is not at risk. Overall, in the scenario of negative
developments on domestic coal availability for utilities, investors may look for
companies that have fuel cost pass-through (NTPC, Reliance Infra) or utilities with
access to domestic captive fuel (Reliance Power).
„ Our top pick: Power Grid, rated Buy
We prefer Power Grid and Lanco. We also have Buy ratings on NTPC, Tata Power
and Reliance Infra.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
India Power Utilities
11 coal blocks de-allocated in one month
„ Event: coal ministry has de-allocated 11 blocks for power companies
According to a release from the coal ministry, the government has de-allocated 11
coal blocks, which were allotted for power generation. The companies that have
been affected by the de-allocation are: NTPC (five blocks), APGENCO (three),
Jharkhand SEB, Damodar Valley Corporation and Baidyanath (one each). Overall,
government companies (10 out of 11 blocks) have been impacted the most.
„ Impact: scrutiny on non-development of coal blocks likely to increase
We believe that the government is becoming more serious on the issue of nondevelopment/slow progress on the blocks that were allocated to the companies.
Although there are concerns that the process of de-allocation has not been
consistent, there is little doubt that the development of captive blocks has not been
fast. This cancelation of blocks would be a positive for the sector because we
believe the companies may become more proactive on timely development of
captive blocks.
„ Action: we prefer companies with low fuel supply risk
We believe the impact on NTPC would be limited as the company operates on fuel
cost pass-through basis, which is not at risk. Overall, in the scenario of negative
developments on domestic coal availability for utilities, investors may look for
companies that have fuel cost pass-through (NTPC, Reliance Infra) or utilities with
access to domestic captive fuel (Reliance Power).
„ Our top pick: Power Grid, rated Buy
We prefer Power Grid and Lanco. We also have Buy ratings on NTPC, Tata Power
and Reliance Infra.
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