Sector Preview Q3FY15 - Power & Utilities ::HDFC Sec

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--> Capacity additions below target…
The power sector added ~1GW capacity vs targeted 2.8GW during Oct-Nov FY15; however YTDFY15 capacity addition stood at 12GW, above the target of 10GW. The total installed
capacity currently stands at 255GW. In Q3FY15, Overall PLF grew to 54% v/s 53% (YoY). Coal project PLF over the same period saw an improvement and stood at 66.4% v/s 63.6% YoY.
Power demand for October and November 2014 grew by 14% and 11% YoY, respectively. This is partly due to a lower base and possible recovery. Over the same period, power supply
increased by average 12% YoY, leading to a base deficit at ~4%.
Imported coal prices were down YoY and QoQ by a wide margin. This could benefit utilities dependent on imported coal.
Government launches e-auction…
The government has launched a portal for e-auction of 24 coal blocks on December 25, 2014, after the Cabinet approved the coal ordinance for the coal block auction. In the first phase
of e-auction, 101 coal mines have been put up for re-allocation, of which 42 are producing, 32 about to produce and the rest 27 unexplored. Of these, 65 will be auctioned and 36
allotted to public sector utilities in the power, steel and cement sectors.
In the phase 1 of auctioning of the 42 Schedule II coal mines, seven blocks have been reserved for the power sector having 499 million tonne (MT) of mineable reserves while 16 for endusers
like iron and steel, cement and captive power plants, and one for the steel sector, with mineable reserves of 875 MT.
The auction process will comprise (i) Techno–commercial bid for qualification and (ii) Financial bid (e-auction) for selection of successful bidder. Only 50% of the qualified bidders from
technical stage (subject to a minimum of 5 bidders) will be allowed to participate in the e-auction process. The new provisions allow a bidder to be technically eligible only if they have
incurred 80 per cent of the total project cost for a Schedule II coal mine or an under-production mine. For Schedule III mines (ready to commence production), the bidder should have
incurred an expenditure not less than 60 per cent of the total project cost.
Moving ahead with the process of auction of mines, the government has invited bidders to come up with dates to visit the coal blocks besides inspecting land documents of the mines.
For the same the government has kept five days which are January 16, 19, 20, 21 and 22. E-auctions for qualified bidders will be held between February 14 -22, 2015. The entire mine
allocation process for Schedule II coal mines will be completed by March 23, 2015. The second phase of auction for 32 Schedule III coal mines will commence soon. Overall, the
government will auction 101 coal blocks by the end of the current fiscal.
Merchant rates softens post the onset of winter
Merchant rate declined 16.5% QoQ to Rs 3.2/Kwh in Q3FY15 due to the onset of severe winter especially in the northern part of the country. Merchant rates however were up 18.8% on
a YoY basis due to lower generation across many hydro power stations in the country from relatively weaker YoY monsoon. Furthermore, election across few states like Maharashtra,
Jharkhand & J&K also kept demand intact for short term power which was higher on YoY basis.
Overall we feel that the sector will see degrowth in PAT on a YoY basis led mainly by NTPC. However on a YoY basis, JSW Energy, CESC and PGCIL could outperform. Tata power results
could continue to be volatile impacted by coal segment.

LINK
http://www.hdfcsec.com/Share-Market-Research/Research-Details/StockReports/3010684