UTILITIES (June-12): ST Power volume record 2-digit growth:: Motilal Oswal

UTILITIES (June-12): ST Power volume record 2-digit growth
Prices firming up; Punjab/UP remains leading procurer
A] Short Term (ST) volume up 17% YoY
 As per CERC's Market Monitoring Cell Report for the month of June 2012, power
trading volumes stood at ~9.4BUs (up 17% YoY and 22% MoM). Power trading volume
for the month of June 2012 was higher, while 1QFY13 ST power volume growth
was muted at ~3% YoY. Power trading volume in FY12 grew by 16% YoY and 23% YoY
in FY11.
 Volumes in Power exchange and UI has grown by 31% and 44% YoY respectively
whereas bilateral volumes (~44% of ST trade) de-grown by 4% YoY. Bi-lateral
volumes have been lower even in the past month and thus down for 1QFY13 too.
 Trading as a percentage to sales for the month stood at 12.3% (v/s 11.4% YoY) and
10.6% (v/s 10.9% YoY) for 1QFY13. PTC India market share during the month stood
lower by 7ppt to 35%, however for 1QFY13 (monthly average) it was 36.8% v/s
32.1% YoY.

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B] ST Price stood at INR4.7/unit up 38% YoY, UI prices goes up
 Weighted average short term tariffs in June-12 stood at INR4.7/unit (up 38% YoY).
All categories of ST power prices have moved up; Bilateral, Power Exchange and
UI prices have moved up by 8% / 47% / 88% YoY respectively.
 ST Prices at IEX has shoot up over the last one month, led by delayed arrival of
monsoon and lower hydro generation. Average price since July-12 stood at INR4.3/
unit v/s an average of INR3.3/unit over April/May-12.
 Valuation and view: We have modeled merchant tariff rates of INR3.5/unit in FY13;
down from INR4/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.


C] June-12: Punjab/UP remain lead buyer of ST power
 During the month of June-12, Punjab/UP continued to remain leading buyer of ST
power and contributed ~30% / 21% to ST purchases respectively. YTDFY13, both
these states has bought 45% of ST power v/s 34% in FY12.
 TN contribution has been muted at 3%, and has lowered its participation in ST
market over the last few month. For YTDF13, it share stood at ~5% v/s 17%/ 24% in
FY12 / FY11 respectively.