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Electric Utilities
Largest power consuming state
hikes power tariff by 10%
India’s largest power consumer, Maharashtra, hikes tariff +10%
We reiterate our view that FY12/13 should be the years of big power tariff hikes
as state discos attempt to not only narrow losses but also repair balance sheets
by regularizing past dues (regulatory asset) on their path to sustainability. In 2011,
11 states accounting for ~35% of India’s energy consumption have hiked power
tariff by ~9-34%. Now, Maharashtra (MERC) has approved ~10% hike in power
tariff of the Maharashtra State Electricity Distribution (MSED), which covers 76%
of its FY11 revenue gap (loss) of Rs38.7bn (see Table 5). In sum, while the
present tariff hike is not enough to extinguish all the losses, this initiative should
fix discos balance sheets in 2-3 years without a tariff shock to consumers and
help kick-start capex. We now look for India’s biggest loss making state, Tamil
Nadu (TN), to hike tariffs during Dec-Jan 2012 by 20-30%.
Late but welcome! Tariff hikes stem losses, re-start capex
Maharashtra is the #1 power consuming state in India with MSED volume
accounting for ~9% of India’s FY12E estimated gross generation. Maharashtra
(MERC) has approved ~10% hike in power tariff of the MSED. This is after 11
states have hiked power by ~9-34%. Key tariff hiked during 2011 - Delhi 21%
(Read), Rajasthan ~24% (Read), Bihar 19%, Chhattisgarh 14%, Himachal 9%,
Jharkhand 19%, Punjab 9%, Orissa 20% (see Table 7 - Table 12) during 2011.
This should support a) kick-start not only to disco capex but also give
confidence to gencos to expand, b) buying of more power from merchant market
and c) repay bank loans on-time.
76% of FY11 revenue gap covered; past claims also allowed
MERC has provided interim relief to MSED of Rs32.6bn which covers 76% of its
FY11 revenue gap of Rs38.7bn and 21% of its FY11 arrears of Rs155bn.
Importantly, MERC has also allowed recovery of past dues worth Rs12.3bn
including the total revenue gap recoverable which would be Rs51bn. Hence, the
current hike covers 64% of total losses incl. past-claims. The relief is to be
recovered through an additional energy charge to be levied to all consumer
categories from Nov 01, 2011 for a period of twelve months (see Table 3).
Tamil Nadu – the next big bang reform!
We now set our sights on India’s biggest loss making state, TN, to hike tariffs by
Dec-Jan 2012 by 20-30%. This is getting delayed due to local body elections,
which is now out-of-the-way. We expect a three-way settlement i.e.
a) A large – 20-30% tariff hike,
b) Hike in Govt. subsidy by revising rate at which Govt. compensate for Agri /
subsidized consumption and
c) State govt to takeover some of past liabilities to clean-up the SEB balance sheet.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Electric Utilities
Largest power consuming state
hikes power tariff by 10%
India’s largest power consumer, Maharashtra, hikes tariff +10%
We reiterate our view that FY12/13 should be the years of big power tariff hikes
as state discos attempt to not only narrow losses but also repair balance sheets
by regularizing past dues (regulatory asset) on their path to sustainability. In 2011,
11 states accounting for ~35% of India’s energy consumption have hiked power
tariff by ~9-34%. Now, Maharashtra (MERC) has approved ~10% hike in power
tariff of the Maharashtra State Electricity Distribution (MSED), which covers 76%
of its FY11 revenue gap (loss) of Rs38.7bn (see Table 5). In sum, while the
present tariff hike is not enough to extinguish all the losses, this initiative should
fix discos balance sheets in 2-3 years without a tariff shock to consumers and
help kick-start capex. We now look for India’s biggest loss making state, Tamil
Nadu (TN), to hike tariffs during Dec-Jan 2012 by 20-30%.
Late but welcome! Tariff hikes stem losses, re-start capex
Maharashtra is the #1 power consuming state in India with MSED volume
accounting for ~9% of India’s FY12E estimated gross generation. Maharashtra
(MERC) has approved ~10% hike in power tariff of the MSED. This is after 11
states have hiked power by ~9-34%. Key tariff hiked during 2011 - Delhi 21%
(Read), Rajasthan ~24% (Read), Bihar 19%, Chhattisgarh 14%, Himachal 9%,
Jharkhand 19%, Punjab 9%, Orissa 20% (see Table 7 - Table 12) during 2011.
This should support a) kick-start not only to disco capex but also give
confidence to gencos to expand, b) buying of more power from merchant market
and c) repay bank loans on-time.
76% of FY11 revenue gap covered; past claims also allowed
MERC has provided interim relief to MSED of Rs32.6bn which covers 76% of its
FY11 revenue gap of Rs38.7bn and 21% of its FY11 arrears of Rs155bn.
Importantly, MERC has also allowed recovery of past dues worth Rs12.3bn
including the total revenue gap recoverable which would be Rs51bn. Hence, the
current hike covers 64% of total losses incl. past-claims. The relief is to be
recovered through an additional energy charge to be levied to all consumer
categories from Nov 01, 2011 for a period of twelve months (see Table 3).
Tamil Nadu – the next big bang reform!
We now set our sights on India’s biggest loss making state, TN, to hike tariffs by
Dec-Jan 2012 by 20-30%. This is getting delayed due to local body elections,
which is now out-of-the-way. We expect a three-way settlement i.e.
a) A large – 20-30% tariff hike,
b) Hike in Govt. subsidy by revising rate at which Govt. compensate for Agri /
subsidized consumption and
c) State govt to takeover some of past liabilities to clean-up the SEB balance sheet.
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