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Defensives outperform; merchant producers decline: In the last month,
Adani (increase in Indonesian coal costs), Lanco (Perdaman case overhang,
high leverage) and JSW (high coal costs, delayed execution) have
underperformed the market. NTPC and PWGR (defensives), as well as TPWR
and RPWR (Power Ministry considering adjusting tariffs for PPAs of UMPPs)
were relative outperformers. JPVL, which had corrected sharply, outperformed
too.
Divergent trends in demand and deficit continue with supply increasing.
Peak/energy deficit of 8.6/4.8% in August continued to slip yoy by 220/250bps,
respectively, while energy demand continued to grow. While peak deficit trend
has been relatively more stable, energy deficit has really come off since Dec as
supply from IPPs catches up with demand growth.
Merchant prices in backwardation. The forward curve indicates an average
merchant rate of ~Rs3.7/unit in Aug-Dec’11 compared to Rs4.2/unit in Apr-
Jul’11 and Rs4.3/unit for the same period last year.
Central sector, expensive IPPs operate at lower PLF. All India thermal PLF
dipped by 600bps mom to 61%, largely on account of the poor performance of
central utilities, including NTPC (70% vs. 77% last month) which had to shut
down a 500MW unit in South India and had low PLF at other plants in the
region due to a strike at the Singareni Coal Mines. NTPC’s gas-based plants also
posted a low 59% PLF. Gas plants of GVK (71-77%), Lanco's Kondapalli
(68%) and GMR's barge mounted plant (77%, other plants were <50%) were
better in comparison. Imported coal based plants of Lanco (Udupi – 50%),
Adani (59%), Reliance Power (67%) were subdued, while JSW was relatively
better.
Stay long the defensives. We recommend staying OW on TPWR (coal
exposure, negatives on Mundra built in) and Powergrid (execution picking up
with limited risks to earnings). We’d continue to avoid Adani, Lanco, RPWR
and JSWE. Lack of progress on Government initiatives to improve fuel security,
concerns on health of SEBs, IPPs’ high leverage, onerous PPAs and poor
operating performance continue to keep us skeptical
Central sector, expensive IPPs operate at lower PLF
All India thermal PLF dipped by 600bps mom to 61%, largely on account of the poor
performance of central utilities including NTPC (70% vs. 77% last month), which
had to shut down a 500MW unit in South India and had low PLF at other plants in
the region due to a strike at the Singareni Coal Mines.
PLFs for relatively high cost gencos have been weak June thru September, implying
reluctance of SEBs to purchase expensive power. Particularly the onset of the
monsoon months offers the option of cheaper hydel power (e.g., JPVL).
Imported coal-based plants:
1. Lanco’s Udupi plant (regulated return) reported a PLF of 50% in August and a
suboptimal average of 59% in 2QFY12.
2. JSW's Vijaynagar plant reported <70% PLF in June and July. However,
performance has been boosted to ~85% levels in the past two months averaging
79% for the Sep-q, while in the past year utilization has been >90%. The Barmer
plant has been idle for the past five months. The Ratnagiri plant reported an
89% PLF in Sep, much better than 60% in August, averaging 76% in the Sep-q
compared to ~70% in 1QFY12.
3. On an absolute basis, Adani’s Mundra plant’s production declined MoM and
PLF dropped to 59%, given the new 660MW unit was commissioned only in Sep.
Since June Adani's PLF has been on the lower side compared to its 80-90% range
post IPO.
4. RPWR's Rosa which had been an exception over the past few months with high
PLFs continued the weak performance of August into September with a 67%
PLF.
Gas-based plants:
5. NTPC’s gas based plants posted a 59% PLF in September, averaging 61% in 2Q.
6. GVK’s Plants: J1&2 (71% vs. 81% in Aug) and Gautami (77% vs. 79%).
7. Lanco’s Kondapalli: 68% PLF in Sep vs. 44% in Aug, averaging 63% for 2Q
compared to 74% in 1Q
8. PLF for GMR’s Vemagiri declined to 48% vs. 76% in Aug and >90% in
1QFY12. While that for the Barge mounted plant was ~77% vs. 57% in Aug and
the peaking Basin Bridge plant continued to be low at 41%.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Defensives outperform; merchant producers decline: In the last month,
Adani (increase in Indonesian coal costs), Lanco (Perdaman case overhang,
high leverage) and JSW (high coal costs, delayed execution) have
underperformed the market. NTPC and PWGR (defensives), as well as TPWR
and RPWR (Power Ministry considering adjusting tariffs for PPAs of UMPPs)
were relative outperformers. JPVL, which had corrected sharply, outperformed
too.
Divergent trends in demand and deficit continue with supply increasing.
Peak/energy deficit of 8.6/4.8% in August continued to slip yoy by 220/250bps,
respectively, while energy demand continued to grow. While peak deficit trend
has been relatively more stable, energy deficit has really come off since Dec as
supply from IPPs catches up with demand growth.
Merchant prices in backwardation. The forward curve indicates an average
merchant rate of ~Rs3.7/unit in Aug-Dec’11 compared to Rs4.2/unit in Apr-
Jul’11 and Rs4.3/unit for the same period last year.
Central sector, expensive IPPs operate at lower PLF. All India thermal PLF
dipped by 600bps mom to 61%, largely on account of the poor performance of
central utilities, including NTPC (70% vs. 77% last month) which had to shut
down a 500MW unit in South India and had low PLF at other plants in the
region due to a strike at the Singareni Coal Mines. NTPC’s gas-based plants also
posted a low 59% PLF. Gas plants of GVK (71-77%), Lanco's Kondapalli
(68%) and GMR's barge mounted plant (77%, other plants were <50%) were
better in comparison. Imported coal based plants of Lanco (Udupi – 50%),
Adani (59%), Reliance Power (67%) were subdued, while JSW was relatively
better.
Stay long the defensives. We recommend staying OW on TPWR (coal
exposure, negatives on Mundra built in) and Powergrid (execution picking up
with limited risks to earnings). We’d continue to avoid Adani, Lanco, RPWR
and JSWE. Lack of progress on Government initiatives to improve fuel security,
concerns on health of SEBs, IPPs’ high leverage, onerous PPAs and poor
operating performance continue to keep us skeptical
Central sector, expensive IPPs operate at lower PLF
All India thermal PLF dipped by 600bps mom to 61%, largely on account of the poor
performance of central utilities including NTPC (70% vs. 77% last month), which
had to shut down a 500MW unit in South India and had low PLF at other plants in
the region due to a strike at the Singareni Coal Mines.
PLFs for relatively high cost gencos have been weak June thru September, implying
reluctance of SEBs to purchase expensive power. Particularly the onset of the
monsoon months offers the option of cheaper hydel power (e.g., JPVL).
Imported coal-based plants:
1. Lanco’s Udupi plant (regulated return) reported a PLF of 50% in August and a
suboptimal average of 59% in 2QFY12.
2. JSW's Vijaynagar plant reported <70% PLF in June and July. However,
performance has been boosted to ~85% levels in the past two months averaging
79% for the Sep-q, while in the past year utilization has been >90%. The Barmer
plant has been idle for the past five months. The Ratnagiri plant reported an
89% PLF in Sep, much better than 60% in August, averaging 76% in the Sep-q
compared to ~70% in 1QFY12.
3. On an absolute basis, Adani’s Mundra plant’s production declined MoM and
PLF dropped to 59%, given the new 660MW unit was commissioned only in Sep.
Since June Adani's PLF has been on the lower side compared to its 80-90% range
post IPO.
4. RPWR's Rosa which had been an exception over the past few months with high
PLFs continued the weak performance of August into September with a 67%
PLF.
Gas-based plants:
5. NTPC’s gas based plants posted a 59% PLF in September, averaging 61% in 2Q.
6. GVK’s Plants: J1&2 (71% vs. 81% in Aug) and Gautami (77% vs. 79%).
7. Lanco’s Kondapalli: 68% PLF in Sep vs. 44% in Aug, averaging 63% for 2Q
compared to 74% in 1Q
8. PLF for GMR’s Vemagiri declined to 48% vs. 76% in Aug and >90% in
1QFY12. While that for the Barge mounted plant was ~77% vs. 57% in Aug and
the peaking Basin Bridge plant continued to be low at 41%.
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