Election euphoria does not translate into demand growth or PLF improvement in May - JPMorgan

Election euphoria does not translate into demand growth or PLF improvement in May

In May, energy demand was flat yoy (up 7% mom); while peak demand grew by 2.4% yoy. Peak deficit was 4.1%, down 220bps yoy and 80bps mom, while the energy deficit was 3.8% down 190bps yoy and 20bps mom. As per CEA forecasts, power supply is expected to increase by ~6% yoy in FY15, led by the private sector. The generation target implies a thermal PLF target of 65.5%, almost flat compared to FY14; however, on a larger capacity base.

Figure 1: India's Power deficit % Source: CEA. Note: May‘14 figures are provisional.

Figure 2: Monthly peak and energy demand growth % Source: CEA. Note: May’14 figures are provisional.

Despite May being the last month of the election campaign, thermal PLFs were sedate. National thermal PLF decreased by 140bps mom and 340bps yoy to 68.2% in May. Central Utilities continued to report higher PLFs, up 80bps yoy to 78% led by NTPC (+300bps yoy in coal PLF to 84%). State and IPP PLFs both declined by 580bps and 440bps respectively to 61% / 67% respectively, IPP PLF improved mom by 140bps.

Figure 1: Sector wise All India PLF (in %)

Source: CEA. Note: May 2014 numbers are tentative.

· CIL dispatches are up 6% yoy, but all IPPs didn’t benefit: In May, Coal India’s dispatches increased 6% yoy, while NTPC benefited with a +300bps yoy improvement in its coal plant PLF to 84%, some IPPs still operate at low PLFs. Domestic coal based plants like JPVL’s Bina (70% vs. 33%), Adani (67% vs. 60% for Tiroda and & 77% vs. 54% for Kawai) reported a mom increase in PLF in May. Newly commissioned Indiabulls’ Amravati (44% vs. 28%) and RPWR’s Butibori (76% vs. 59%) fared better, however JSPL’s Tamnar II reported only a 7% PLF and KSK’s Akaltara (51% vs. 62%) reported a decline. Sterlite’s Jharsuguda (39% vs. 52%), CLP (36% vs. 32%), and Lanco’s Amarkantak (49% vs. 44%) continued to report low PLFs while TPWR’s Maithon PLF declined (74% vs. 80%).

Figure 1: Coal India: Production and Dispatch volume

MMT

 Source: Coal India

· NTPC coal PLFs improve, significant capacity to be eligible for incentives in FY15: NTPC reported 84% PLF for its coal based plants in May up 300bps yoy and 87% in April up 940bps yoy. The significant yoy improvement is driven by the Farakka and Kahalgaon plants, which have a new coal transport system in place via inland waterways as well as the Sipat, Simhadri and Talcher plants. In May, 8 of the 16 commercial coal plants totaling 16GW of capacity (50% of total) reported >85% PLF vs. 11 plants totaling 26GW (~80% of total) in April, thus being eligible for incentives in the new regulatory regime. For all gas based capacity (4GW) PLF was <85 p="">

· Imported coal based plants show better PLFs again on the back of benign input costs: Since the beginning of the year, Indonesian coal prices are down 7-8% in US$ terms, while South African coal prices have declined by ~12%. Meanwhile, the INR has appreciated by ~4%, translating into a 11-16% decline in imported coal costs for Indian utilities. Reduced cost of fuel will help power producers like JSW (low fixed costs, merchant tariff) and Adani Power (fuel cost under recovery in PPA) rise up in the merit order of dispatch for cost conscious SEBs thus boosting PLF. JSW’s Ratnagiri (73% vs. 50%), Lanco’s Udupi (79% vs. 80%), RPWR’s Rosa (97% vs. 91%), TPWR’s Mundra (flat at 74%), Adani’s Mundra (89% vs. 85%) and JSW’s Vijaynagar (102% vs. 104%) all reported flat to improving PLFs.

Figure 2: Richards Bay Coal Index (6,000 kcal/kg) Source: Bloomberg.

Figure 3: Indonesia Ecocoal Index (4,200 kcal/kg) Source: Bloomberg.

Figure 4: Indonesia Melawan Coal Index (5,400 kcal/kg) Source: Bloomberg.

· Captive coal based plants: The three units of Sasan reported 65% vs. 75% in April. With a renewed annual mining quota, JSW’s Barmer reported 82% PLF in May up 200bps from April. JSPL’s Tamnar plant reported a mom flat PLF of 99%.

· Hydro season gets off to a slow start for JPVL: For the country, hydro power production is up 9% yoy ahead of the 3% capacity addition implying better PLF in May. However, JPVL’s Baspa (52% vs. 71% in May’13) and Karcham Wangtoo (56% vs. 80%) plants have reported a significant decline in PLF. Post the flood related repairs, the company’s Vishnuprayag hydro project restarted production in April after a gap of 9 months, reporting a PLF of 56% vs. 69% last year.

Table 1: India Power Sector: Monthly PLFs

	Production Units (mn units)						PLF
	May '13	Jan'14	Feb'14	Mar'14	Apr'14	May'14	May '13	Jan'14	Feb'14	Mar'14	Apr'14	May'14
Torrent Power	438	449	371	472	472	594	36%	37%	34%	39%	40%	48%
AECO (500MW)	244	277	181	267	269	380	66%	74%	54%	72%	75%	102%
Sugen (1147.5MW)	194	172	190	206	203	213	23%	20%	25%	24%	25%	25%
Reliance Power	891	946	1,232	1,491	2,102	2,159	80%	47%	65%	58%	77%	77%
Rosa (1200MW)	792	552	659	706	782	866	89%	62%	82%	79%	91%	97%
Butibori (600MW)	99	-	-	17	255	338	44%	0%	0%	8%	59%	76%
Sasan (1,980MW)		394	573	768	1,065	955		44%	65%	52%	75%	65%
Reliance Infra	411	288	380	415	385	427	72%	50%	74%	73%	70%	75%
Dahanu (500MW)	357	224	325	364	373	380	96%	60%	97%	98%	104%	102%
Goa (48MW)	22	22	20	22	13	22	61%	61%	62%	61%	36%	61%
Samalkot (220MW)	33	42	34	30	-	25	20%	26%	23%	18%	0%	15%
Lanco	1,669	1,702	1,644	1,826	1,849	1,904	57%	59%	63%	63%	66%	66%
Aban (120MW)	58	65	65	67	66	74	65%	73%	81%	75%	76%	82%
Kondapalli 1&2 (716MW)	147	110	150	145	159	135	28%	21%	31%	27%	31%	25%
Amarkantak (600MW)	210	181	193	215	191	219	47%	41%	48%	48%	44%	49%
Udupi (1200MW)	675	737	690	717	693	703	76%	83%	86%	80%	80%	79%
Anpara (1200MW)	563	609	542	675	726	741	63%	68%	67%	76%	84%	83%
Budhil (70MW)	17	-	3	7	14	33	32%	0%	7%	14%	28%	63%
JSW Energy	1,973	1,604	1,156	1,164	1,696	1,968	84%	69%	55%	50%	75%	84%
Vijaynagar (860MW)	615	617	602	651	647	654	96%	96%	104%	102%	104%	102%
Ratnagiri (1200MW)	768	592	529	424	430	655	86%	66%	66%	47%	50%	73%
Barmer (1080MW)	590	395	25	89	620	660	73%	49%	3%	11%	80%	82%
Adani Power	2,898	4,735	3,595	4,533	4,491	5,139	66%	80%	68%	75%	73%	81%
Mundra (4,260MW)	2,522	2,803	2,329	2,641	2,827	3,075	73%	82%	75%	77%	85%	89%
Tiroda (1,980MW)	376	1,183	897	1,174	1,149	1,312	38%	80%	67%	72%	60%	67%
Kawai (1,320MW)		749	369	717	516	753		76%	42%	73%	54%	77%
GVK	71	98	87	78	53	74	10%	14%	14%	11%	8%	11%
J1 &2 (455MW)	71	98	87	78	53	74	21%	29%	28%	23%	16%	22%
Gautami (464MW)	-	-	-	-	-		0%	0%	0%	0%	0%	0%
GMR	255	602	570	562	683	688	24%	46%	49%	43%	53%	38%
Vemagiri (370MW)	2	-	-	-	-	-	1%	0%	0%	0%	0%	0%
Mangalore (220MW)	-	-	-	-	-	-	0%	0%	0%	0%	0%	0%
Basin Bridge (200MW)	91	36	71	97	110	90	61%	24%	53%	65%	74%	60%
EMCO (300MW)	19	324	278	249	302	323	9%	73%	69%	56%	68%	72%
Kamalanga (1050MW)	142	242	221	216	270	276	55%	93%	94%	83%	104%	35%
NTPC (37,032MW)	19,938	21,431	19,670	21,519	21,568	21,301	75%	78%	79%	78%	81%	77%
Coal (33,015MW)	18,642	20,422	18,654	20,451	20,326	20,217	79%	83%	84%	83%	85%	82%
Gas (4,017MW)	1,295	1,010	1,016	1,068	1,242	1,084	43%	34%	38%	36%	43%	36%
Tata Power	3,899	3,681	3,495	3,525	3,665	3,746	70%	66%	70%	64%	68%	68%
Mumbai License Area (1,580MW)	822	483	412	449	552	586	70%	41%	39%	38%	49%	50%
Mundra UMPP (4,000MW)	2,152	2,310	2,323	2,167	2,144	2,205	72%	78%	86%	73%	74%	74%
Maithon (1,050MW)	599	584	485	585	607	581	77%	75%	69%	75%	80%	74%
Jojobera (441MW)	200	173	173	213	240	239	61%	53%	58%	65%	76%	73%
Bhira (150MW)	66	73	52	59	71	83	59%	65%	52%	53%	66%	74%
Bhivpuri (75MW)	35	35	29	32	36	36	64%	63%	57%	57%	67%	65%
Khopoli (72MW)	24	24	22	20	15	16	45%	45%	45%	37%	30%	30%
Belgaum (81MW)	-	-	-	-	-	-	0%	0%	0%	0%	0%	0%
JPVL	1,099	408	347	149	358	957	67%	25%	23%	9%	23%	58%
Vishnuprayag (400MW)	204	-	-	-	44	165	69%	0%	0%	0%	15%	56%
Baspa (300MW)	158	33	28	30	39	115	71%	15%	14%	13%	18%	52%
Karcham Wangtoo (1000MW)	597	114	95	119	157	416	80%	15%	14%	16%	22%	56%
Bina (500MW)	139	261	225	-	118	261	37%	70%	67%	0%	33%	70%
Sterlite	1,205	550	582	720	894	704	67%	31%	36%	40%	52%	39%
Jharsuguda (SEL 2400MW)	1,205	550	582	720	894	704	67%	31%	36%	40%	52%	39%
China Light and Power	307	642	408	421	302	351	31%	65%	46%	43%	32%	36%
Jhajjar (1,320MW)	307	642	408	421	302	351	31%	65%	46%	43%	32%	36%
JSPL	759	498	591	737	833	795	102%	67%	88%	99%	53%	99%
Jindal Power (1000MW)	759	498	591	737	714	735	102%	67%	88%	99%	99%	99%
Tamnar (1,200MW)					120	59					14%	7%
KSK Energy	268	150	330	433	274	319	67%	37%	43%	51%	33%	38%
Wardha Warora (540MW)	268	150	89	155	5	93	67%	37%	24%	39%	1%	23%
Akaltara (600MW)			241	278	269	226			60%	62%	62%	51%
ACB	262	270	277	310	288	292	67%	69%	78%	79%	76%	74%
Korba (270MW)	155	158	167	183	188	181	77%	79%	92%	91%	97%	90%
SPGL (208MW)	79	110	108	107	72	84	51%	71%	77%	69%	48%	54%
Ratija (50MW)	27	3	2	20	28	28	74%	7%	5%	55%	79%	75%
Indiabulls Power		116	198	181	109	176		58%	48%	45%	19%	29%
Amravati (540MW)		116	191	181	109	176		58%	91%	90%	28%	44%
Nasik (270MW)			7	-	-	-			4%	0%	0%	0%

Source: CEA, J.P.Morgan. Note: May 2014 numbers are tentative. NTPC’s reported PLF defers from our calculated PLF in the table above.

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