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Power of regulated returns
NTPC’s 2Q PLF for coal-power capacity was down 4.5pptYoY to 78.4%
and availability was down 3ppt to 83.4% due to 7% decline in coal supply
as well as lower off-take by SEBs (due to strong hydro and nuclear power
generation). Despite these issues NTPC’s pre-exceptional profit is up YoY
as most of its earnings are protected as long as availability is over 85%
(86.7% in 1H). Management is confident of maintaining flat availability
for FY12 (at 92%) which looks difficult to achieve. We factor in 2ppt
decline in availability and 3.8ppt decline in PLF. NTPC remains one of the
few +ve recos in the Indian power sector. O-PF
2Q performance impacted by coal shortages, lower off-take
NTPC’s commercial power generation was down 3.6% YoY in 2QFY12 while
sales were down 3.8%YoY. NTPC estimates that it lost 7.4bn units of
generation in 2Q (14% of total generation) of which 75% was lost due to lack
of power off-take from customers and 25% was lost due to coal shortages at
NTPC’s stations. NTPC reported 7%YoY decline in coal supplies in 2Q despite
35% YoY growth in coal imports. Coal mine flooding and Telangana dispute
had a big impact on coal supplies to NTPC. Customer off-take for thermal
power was also weak given very strong hydro and nuclear power (heavy rains
and improved availability of imported uranium) generation in 1HFY12.
Performance should improve in 2H
Historically 3Q and 4Q have been the peak quarters for NTPC’s power
generation and profitability. NTPC claims to have taken more planned outages
(for maintenance of plants) in 2Q given low demand, which should help boost
availability for rest of the year. However, achieving flat availability is also
contingent on supply of coal which will remain a concern. We expect a pick up
in generation in 2H but have factored in a 2ppt fall in availability and a 3.8ppt
decline in PLF to 84.5% for FY12.
The power of regulated returns
Despite a sharp decline in coal supply and coal costs as well as lower power
generation NTPC has been able to improve its profits in 2Q and 1H as it added
capacity during this period and most of its returns are linked to plant
availability instead of actual generation. NTPC can also import coal for its
power plants to declare availability given it has a full fuel cost pass through.
Most private power companies do not have this privilege. As a result NTPC
remains one of our preferred picks in the Indian power sector. Maintain O-PF
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Power of regulated returns
NTPC’s 2Q PLF for coal-power capacity was down 4.5pptYoY to 78.4%
and availability was down 3ppt to 83.4% due to 7% decline in coal supply
as well as lower off-take by SEBs (due to strong hydro and nuclear power
generation). Despite these issues NTPC’s pre-exceptional profit is up YoY
as most of its earnings are protected as long as availability is over 85%
(86.7% in 1H). Management is confident of maintaining flat availability
for FY12 (at 92%) which looks difficult to achieve. We factor in 2ppt
decline in availability and 3.8ppt decline in PLF. NTPC remains one of the
few +ve recos in the Indian power sector. O-PF
2Q performance impacted by coal shortages, lower off-take
NTPC’s commercial power generation was down 3.6% YoY in 2QFY12 while
sales were down 3.8%YoY. NTPC estimates that it lost 7.4bn units of
generation in 2Q (14% of total generation) of which 75% was lost due to lack
of power off-take from customers and 25% was lost due to coal shortages at
NTPC’s stations. NTPC reported 7%YoY decline in coal supplies in 2Q despite
35% YoY growth in coal imports. Coal mine flooding and Telangana dispute
had a big impact on coal supplies to NTPC. Customer off-take for thermal
power was also weak given very strong hydro and nuclear power (heavy rains
and improved availability of imported uranium) generation in 1HFY12.
Performance should improve in 2H
Historically 3Q and 4Q have been the peak quarters for NTPC’s power
generation and profitability. NTPC claims to have taken more planned outages
(for maintenance of plants) in 2Q given low demand, which should help boost
availability for rest of the year. However, achieving flat availability is also
contingent on supply of coal which will remain a concern. We expect a pick up
in generation in 2H but have factored in a 2ppt fall in availability and a 3.8ppt
decline in PLF to 84.5% for FY12.
The power of regulated returns
Despite a sharp decline in coal supply and coal costs as well as lower power
generation NTPC has been able to improve its profits in 2Q and 1H as it added
capacity during this period and most of its returns are linked to plant
availability instead of actual generation. NTPC can also import coal for its
power plants to declare availability given it has a full fuel cost pass through.
Most private power companies do not have this privilege. As a result NTPC
remains one of our preferred picks in the Indian power sector. Maintain O-PF
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