Positive for JSW Energy
Company /
Industry analysis
CERC released forward curve date for Short term (ST) prices for July-12. Contracted
volume for the month stood at 636MUs, down 72% MoM. Average monthly
contracted volume for 1QFY13 and FY12 stood at 2.7BUs and 2.6BUs respectively.
Lower contracted volume in bilateral category could have been led by higher ST
tariff (INR4/unit+) in the market. However we understand ST tariff has seen
uptrend in all categories of ST power.
During the month, 66% of total volume has been contracted at price more than
INR4/Unit v/s 36% MoM and an average of 25% in 1QFY13.
We note that the tariff curve for the contacts executed in July-12 has maintained
at INR4/unit +. Bilateral power delivery in August/Sept has moved up marginally
by ~1-4paise per unit. Sustenance of tariff is led by muted monsoon, lower hydro
generation (source of peak power).
For FY13, amongst our coverage universe, JSW Energy (Buy) and Adani Power
(Neutral) have the highest sensitivity to merchant prices and is expected to sell
~50% and ~25% of their generation at merchant tariffs respectively.
Valuations and view: We have modeled merchant tariff rates of INR3.5/unit in
FY13; down from INR4.0/unit in FY12. For FY13, amongst our coverage universe,
JSW Energy (Buy) and Adani Power (Neutral) have the highest sensitivity to
merchant prices and are expected to sell 50% and 25% of their generation at
merchant tariffs respectively. JSW energy would remain key beneficiary of falling
coal prices and firm ST prices.
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