power sector - monthly update - july 2012

7/31/2019 Power Sector - Monthly Update - July 2012

1/7Please refer to our disclaimer given at the last page.

Analyst: Rabindra Nath Nayak Tel: 42273310 E-mail: [email protected] Alok Ramachandran 42273478 [email protected]

July 20, 2012

Finally hydel PLFs improve as cyclicality kicks in, All India PLFs fall a tad

In June 2012, all-India generation was up by a 8.1% YoY to 76.3bn units, due to the addition of 2,042 MW of monitored capacity.

Thermal generation grew strongly by 11.4% YoY in June 2012. The hydel sector finally improved its generation as cyclicality kicksin. Despite a lower 5.5% YoY growth in the hydel sector, generation was up sequentially by 12.1%. NTPC reported 9.1% YoY

growth in generation in June 2012 against a negative growth of 4% in June 2011. Nuclear generation grew by 8.8% and have been

operating at a higher PLFs of 80-82% in the past three months. NHPCs generation was up 1.9% YoY and 16% MoM, but was

3.3% lower YTD. NHPCs & SJVNs PLFs improved substantially for the second consecutive month jumping from 74% & 61%

recorded in May 2012 to 84% & 93%respectively.

Power deficit at 8.6% in June 2012

In June 2012, power deficit in India rose to 8.6% from 5.4% YoY. The power deficit contracted (MoM) for the fourth consecutive

month. Power generation grew by a strong 8.1% YoY compared to power availability which grew faster at 11.4%. Power

requirement grew at a faster pace by 15.3% YoY and 1.3% MoM in June 2012.

Indonesian governments coal reference price down by 5.4% in July 2012

Prices of major coal grades fell again in July 2012. The Newcastle coal index fell for the eighth consecutive month to US$85.3 per

tonne, down 28.5% YoY and 1.7% MoM. The Richards bay index fell by 27.2% YoY to US$85.5 per tonne. The Indonesian

government has set a coal reference price of US$87.56 per tonne (9.4% below Junes reference price of US$96.7) for July 2012.

The slowing demand for thermal coal from China is expected to continue.

Discom Restructuring Broad framework

In the restructuring plan, about half of the short term loans outstanding on March 31, 2012 will be taken over by the state

government after discoms issue bonds to lenders. The maturity of these bonds will be 15 years and the issuance calendar will be

based on the fiscal space available with states. The remaining 50% of the liabilities will be rescheduled and serviced by discoms

with a three-year moratorium. On their part, state governments will have to ensure that electricity tariffs are revised; release subsidy

in advance, metering and audit are undertaken. (See Flowchart on Page 5).

2,376MW commissioned in June12

According to the CEA, the country has commissioned 2,376MW in June 2012. Till June12, the country witnessed a capacity

addition to the tune of 5,266MW. In the 11th

plan, the country added 50,805MW (thermal, hydro and nuclear). This significant rise in

project commissioning is expected to continue going forward in F13e as well. The Planning commission has set a power capacity

addition target of 88,425MW for the 12th

plan. As per the draft note, out of the projected capacity addition, thermal sources - coal,

lignite and gas -- would make up for 71,228 MW while hydro would account for 11,897 MW. Nuclear power is estimated to be

contributing 5,300 MW.

Valuation

F 13e F 14e F 13e F 14e F 13e F 14e F 13e F 14e F 13e F 14e F 13e F 14e

Net Sales (Rs mn) 696,438 788,401 126,521 153,682 61,619 80,417 57,489 60,384 73,085 82,672 52,666 56,416

% growth 13.9 13.2 26.1 21.5 19.3 30.5 18.1 5.0 (1.8) 13.1 14.4 7.1

EBITDA (Rs mn) 162,366 195,854 107,450 131,849 38,101 52,694 21,725 21,782 15,297 13,938 13,375.0 13,395.8

% growth 23.5 20.6 28.2 22.7 18.0 38.3 25.06 0.26 (14.2) (8.9) 23.64 0.16

PAT (Rs mn) 106,439 121,203 39,055 46,974 26,021 36,799 15,223 15,914 9,469 6,973 6,439 6,982

EPS (Rs / share) 12.9 14.7 8.4 10.1 2.1 3.0 9.1 9.5 20.0 14.8 51.3 55.6

EPS Growth (%) 15.4 13.9 20.7 20.3 23.4 41.4 7.9 4.5 (22.3) (26.4) 16.2 8.4

P/E (x) 12.2 10.7 13.2 13.0 8.6 6.1 9.0 8.6 9.0 12.3 0.4 0.4

P/BV (x) 1.6 1.4 2.0 1.7 0.9 0.8 1.1 1.0 1.3 1.3 5.9 5.4

EV/EBITDA (x) 8.4 7.9 10.2 9.3 10.4 7.5 6.1 6.4 8.6 9.8 3.6 3.4

EV/Sales 2.4 2.3 8.7 8.0 6.4 4.9 2.3 2.3 1.8 1.7 0.9 0.8

RoNW (%) 12.7 13.2 15.0 16.0 9.9 13.2 11.7 11.4 14.7 10.2 5.4 5.6

RoCE (%) 16.2 15.7 13.0 10.8 5.9 7.8 8.7 8.4 8.0 5.4 9.6 9.5

Rating

Target 165 125 20 122 195 381

ADD BUY ADD BUY ADD BUY

NHPCKey Indicators

CESCNeyveli Lignite Torrent PowerPGCILNTPC

Source: SSLe

Monthly Update July 2012


2/7

Power Sector Monthly Update June 2012 SBICAP Securities Ltd

July 20, 2012 | 2

Power Sector Update

Finally hydel PLFs improve as cyclicality kicks in, All India PLFs fall a

tad

In June 2012, all-India generation was up by a 8.1% YoY to 76.3bn units, due to the

addition of 2,042 MW of monitored capacity. Thermal generation grew strongly by

11.4% YoY in June 2012. The hydel sector finally improved its generation as

cyclicality kicks in. Despite a lower 5.5% YoY growth in the hydel sector, generationwas up sequentially by 12.1%. NTPC reported 9.1% YoY growth in generation in

June 2012 against a negative growth of 4% in June 2011. Nuclear generation grew

by 8.8% and have been operating at a higher PLFs of 80-82% in the past three

months. NHPCs generation was up 1.9% YoY and 16% MoM, but was 3.3% lower

YTD. NHPCs & SJVNs PLFs improved substantially for the second consecutive

month jumping from 74% & 61% recorded in May 2012 to 84% & 93%respectively.

Coal-based generation grows by 16.75% in June 2012

0

25

50

75

100

0

7,500

15,000

22,500

30,000

May-11

Jun-11

Jul-11

Aug-11

Sep-11

Oct-11

Nov-11

Dec-11

Jan-12

Feb-12

Mar-12

Apr-12

May-12

Jun-12

(%

)

(MW

)

Central Hydel Capacity State Hydel Capacity

Central Hydel PLF State Hydel PLF

0

20

40

60

80

100

4,400

4,500

4,600

4,700

4,800

May-11

Jun-11

Jul-11

Aug-11

Sep-11

Oct-11

Nov-11

Dec-11

Jan-12

Feb-12

Mar-12

Apr-12

May-12

Jun-12

(%

)

(MW)

Nuclear Capacity Nuclear PLF

0

25

50

75

100

0

15,000

30,000

45,000

60,000

May-11

Jun-11

Jul-11

Aug-11

Sep-11

Oct-11

Nov-11

Dec-11

Jan-12

Feb-12

Mar-12

Apr-12

May-12

Jun-12

(%)

(MW)

Central Thermal capacity State Thermal capacity

Central Thermal PLF State Thermal PLF

0

25

50

75

100

0

6,500

13,000

19,500

26,000

32,500

May-11

Jun-11

Jul-11

Aug-11

Sep-11

Oct-11

Nov-11

Dec-11

Jan-12

Feb-12

Mar-12

Apr-12

May-12

Jun-12

(%)

(MW)

IPP Thermal capacity Pvt. Utl. Thermal capacity

IPP TH PLF Pvt. Utl. TH PLF

50

55

60

65

70

0

20,000

40,000

60,000

80,000

100,000

May-1

1

Jun-1

1

Ju

l-11

Aug-1

1

Sep-1

1

Oc

t-11

Nov-1

1

Dec-1

1

Jan-1

2

Fe

b-1

2

Mar-

12

Apr-

12

May-1

2

Jun-1

2

(%)

(MU's)

All India units gen. All India PLF Source: CEA, SSL

NHPCs & SJVNs PLFs improved

substantially for the second consecutive

month jumping from 74% & 61% recorded

in May 2012 to 84% & 93%respectively.


3/7


July 20, 2012 | 3

Power deficit at 8.6% in June 2012

In June 2012, power deficit in India rose to 8.6% from 5.4% YoY. The power deficit

contracted (MoM) for the fourth consecutive month. Power generation grew by a

strong 8.1% YoY compared to power availability which grew faster at 11.4%. Power

requirement grew at a faster pace by 15.3% YoY and 1.3% MoM in June 2012.

According to the CERC, the forward curve prices from July 2012 to June 2013 will

be generally flat in the range of Rs3.75-4.41 per unit. The forward curve on 9th July

2012 which depicts reported contracts due to delivery over the next one year,

shows that, the numbers of contracts (due for delivery) reported for the initial

months (July and August 2012) were higher (30 to 8 contracts) than those of later

months i.e. October 2012 to June 2013. Also, prices for these reported contracts

due to delivery in July & August 2012 have increased from Rs3.85 to Rs4.41 per

unit. It shows an alignment in the market that liquidity is higher for the near term.

(Analysis of Weekly Reporting by Licensed Traders for May 2012).

All India PLF and average deficit Average Deficit

50

55

60

65

70

136,000

144,000

152,000

160,000

168,000

176,000

184,000

May-11

Jun-11

Jul-11

Aug-11

Sep-11

Oct-11

Nov-11

Dec-11

Jan-12

Feb-12

Mar-12

Apr-12

May-12

Jun-12

(%

)

(MW

)

All I ndia Capacit y All I ndia PLF ( %)

(16.0)

(12.0)

(8.0)

(4.0)

0.0

Apr

MayJunJul

Aug

SepOct

Nov

Dec

JanFeb

Mar

(%

)

2010 2011 2012

Source: CEA, SSLe

Average merchant tariffs fall back to Rs3.5per unit in July 2012

0

5

9

14

18

Jun-11

Jul-11

Aug-11

Sep-11

Oct-11

Nov-11

Dec-11

Jan-12

Feb-12

Mar-12

Apr-12

May-12

Jun-12

Jul-12

Average Daily max Daily min

Source: IEX, SSLe

May 2012 witnessed a 64% YoY increase in merchant demand in buyers but a 11.1% de-growth in sellers

0.0

0.5

1.0

1.5

2.0

2.5

0

1,000

2,000

3,000

4,000

Jun-11

Jul-11

Aug-11

Sep-11

Oct-11

Nov-11

Dec-11

Jan-12

Feb-12

Mar-12

Apr-12

May-12

(x)

(MU's)

No Buy bids No of Sell offers Buyers/Salers

0

2

4

6

8

10

Dec-10

Feb-11

Apr-11

Jun-11

Aug-11

Oct-11

Dec-11

Feb-12

Apr-12

Jun-12

IEX Bi-Lat Wt Avg NEW Grid

Bi-Lat Max Bi-Lat Min

Source: CERC

Average merchant prices correct to

sub-4 levels in July 2012 after the

initial spurt in June 2012

Forward curve prices from July 2012to June 2013 will be generally flat in

the range of Rs3.75-4.41 per unit.


4/7


July 20, 2012 | 4

Indonesian governments coal reference price down by 5.4% in July 2012

Prices of major coal grades fell again in July 2012. The Newcastle coal index fell for

the eighth consecutive month to US$85.3 per tonne, down 28.5% YoY and 1.7%

MoM. The Richards bay index fell by 27.2% YoY to US$85.5 per tonne. The

Indonesian government has set a coal reference price of US$87.56 per tonne (9.4%

below Junes reference price of US$96.7) for July 2012. The slowing demand for

thermal coal from China is expected to continue.

Coal prices continue to fall

0

50

100

150

200

S

ep-0

8

D

ec-0

8

Mar-

09

Jun-0

9

S

ep-0

9

D

ec-0

9

Mar-

10

Jun-1

0

S

ep-1

0

D

ec-1

0

Mar-

11

Jun-1

1

S

ep-1

1

D

ec-1

1

Mar-

12

Jun-1

2

(US$/me

trictonne

)

Newcastle Coal Index

`

0

30

60

90

120

150

180

Jun-0

8

Sep-0

8

Dec-0

8

Mar-

09

Jun-0

9

Sep-0

9

Dec-0

9

Mar-

10

Jun-1

0

Sep-1

0

Dec-1

0

Mar-

11

Jun-1

1

Sep-1

1

Dec-1

1

Mar-

12

Jun-1

2(USD$/me

trictonne

)

Richards Bay Coal Index

35

55

75

95

115

135

Fe

b-1

0

Apr-

10

Jun-1

0

Aug-1

0

Oc

t-10

Dec-1

0

Fe

b-1

1

Apr-

11

Jun-1

1

Aug-1

1

Oc

t-11

Dec-1

1

Fe

b-1

2

Apr-

12

Jun-1

2

USD/tonne

Indonesian Coal Reference Price Index

35

40

45

50

55

60

Fe

b-0

9

May-0

9

Aug-0

9

Nov-0

9

Fe

b-1

0

May-1

0

Aug-1

0

Nov-1

0

Fe

b-1

1

May-1

1

Au

-11

Nov-1

1

Fe

b-1

2

May-1

2

Rs

USD INR

Source: Bloomberg, SSLGas prices continue to remain firm

-

1.5

3.0

4.5

6.0

7.5

9.0

10.5

Apr-

08

Ju

l-08

Oc

t-08

Jan-0

9

Apr-

09

Ju

l-09

Oc

t-09

Jan-1

0

Apr-

10

Ju

l-10

Oc

t-10

Jan-1

1

Apr-

11

Ju

l-11

Oc

t-11

Jan-1

2

Apr-

12

Ju

l-12

US$

Monthly FOB Gas Prices

Source: Bloomberg, SSL


5/7


July 20, 2012 | 5

Mandatory Conditions

Preparation of Financial Restructuring Plan for the state Discoms and approvalfrom the principal lenders.

State government shall convert all its loans to equity or defer the recovery of suchloans along with interest till the loans rescheduled by banks/ FIs are fully repaid.

The state government shall pay all its outstanding energy bills as of March31,2012 by August 31, 2012 and the utilities shall furnish a certificate to this effect

by September 30, 2012 to CLMC through SLMC. FRP of Discoms of respective states is to be filed with SERCs for in-principle

approval. The state government would ensure that Discoms eliminate the gap between

ACS and ARR within the period of moratorium of the bonds issued by the stategovernment.

State government and Discoms not to resort short term loans from banks/ FIs tofund operational losses except as provided in the scheme.


6/7


July 20, 2012 | 6

2,376MW commissioned in June12

According to the CEA, the country has commissioned 2,376MW in June 2012. Till

June12, the country witnessed a capacity addition to the tune of 5,266MW. In the 11th

plan, the country added 50,805MW (thermal, hydro and nuclear). This significant rise in

project commissioning is expected to continue going forward in F13e as well. The

Planning commission has set a power capacity addition target of 88,425MW for the 12th

plan. As per the draft note, out of the projected capacity addition, thermal sources - coal,

lignite and gas -- would make up for 71,228 MW while hydro would account for 11,897

MW. Nuclear power is estimated to be contributing 5,300 MW.

Projects commissioned in F13till date

4,965

301

Capacity Addition Apr'12-June'13

Thermal (MW) Hydro (MW)

0%

30%

60%

90%

120%

0

18,000

36,000

54,000

72,000

90,000

108,000

1st

2nd

3rd 4

th5th

6th

7th

8th

9th

10th

11th

12th

(%)

(MW)

Plan-wise Achievement

Target Achievement % of Achievement

Source: CEA, SSL

New project announcements picks up a bit; projects under implementation still robust

0

750

1,500

2,250

3,000

Mar-

07

Ju

l-07

Nov-0

7

Mar-

08

Ju

l-08

Nov-0

8

Mar-

09

Ju

l-09

Nov-0

9

Mar-

10

Ju

l-10

Nov-1

0

Mar-

11

Ju

l-11

Nov-1

1

Mar-

12

(Rs

Bn

)

Projects Announcements

-10

0

10

20

30

40

50

6070

80

0

150

300

450

600

750

Mar-

10

Jun-1

0

Sep-1

0

Dec-1

0

Mar-

11

Jun-1

1

Sep-1

1

Dec-1

1

Mar-

12

Jun-1

2

(%)

(Rs

Bn

)

Project Shelved

Al l India Abandoned % of Electr ici ty projects abandoned

0.0

0.2

0.4

0.6

0

10,000

20,000

30,000

40,000

50,000

Mar-

09

Jun-0

9

Sep-0

9

Dec-0

9

Mar-

10

Jun-1

0

Sep-1

0

Dec-1

0

Mar-

11

Jun-1

1

Sep-1

1

Dec-1

1

Mar-

12

Jun-1

2

(x)

(Rs

Bn

)

Announced & Under Implementation

Investments at the end of quarter (A - B + C) Announced Under Implementation/Announced

Source: CMIE, SSL


7/7


July 20, 2012 | 7

News during the month

Power ministry agrees for coal price pooling model.Click here

12th Plan power capacity target cut to 88,000 MW.Click here

India Plans to Aid Power Distributors.Click here

Call on Tata Power and Adani's rate hike plea deferred.Click here

Power capacity target hinges on coal, land links: Shinde Click here

India wont have much coal by 13th Plan: Sushil Kumar Shinde.Click here

Link power reform funds to milestones that show deployment of political will.Click here
http://economictimes.indiatimes.com/news/news-by-industry/energy/power/power-ministry-agrees-for-coal-price-pooling-model/articleshow/15053004.cmshttp://economictimes.indiatimes.com/news/news-by-industry/energy/power/power-ministry-agrees-for-coal-price-pooling-model/articleshow/15053004.cmshttp://economictimes.indiatimes.com/news/news-by-industry/energy/power/power-ministry-agrees-for-coal-price-pooling-model/articleshow/15053004.cmshttp://business-standard.com/india/news/12th-plan-power-capacity-target-cut-to-88000-mw/480745/http://business-standard.com/india/news/12th-plan-power-capacity-target-cut-to-88000-mw/480745/http://business-standard.com/india/news/12th-plan-power-capacity-target-cut-to-88000-mw/480745/http://online.wsj.com/article/SB10001424052702304039104577534420439925062.html?mod=googlenews_wsjhttp://online.wsj.com/article/SB10001424052702304039104577534420439925062.html?mod=googlenews_wsjhttp://online.wsj.com/article/SB10001424052702304039104577534420439925062.html?mod=googlenews_wsjhttp://business-standard.com/india/news/calltata-poweradanis-rate-hike-plea-deferred/480951/http://business-standard.com/india/news/calltata-poweradanis-rate-hike-plea-deferred/480951/http://business-standard.com/india/news/calltata-poweradanis-rate-hike-plea-deferred/480951/http://www.hindustantimes.com/India-news/NewDelhi/Power-capacity-target-hinges-on-coal-land-links-Shinde/Article1-890770.aspxhttp://www.hindustantimes.com/India-news/NewDelhi/Power-capacity-target-hinges-on-coal-land-links-Shinde/Article1-890770.aspxhttp://profit.ndtv.com/Interviews/Article/india-won-t-have-much-coal-by-13th-plan-sushil-kumar-shinde-308055http://profit.ndtv.com/Interviews/Article/india-won-t-have-much-coal-by-13th-plan-sushil-kumar-shinde-308055http://profit.ndtv.com/Interviews/Article/india-won-t-have-much-coal-by-13th-plan-sushil-kumar-shinde-308055http://articles.economictimes.indiatimes.com/2012-07-19/news/32747211_1_power-sector-power-rates-power-utilitieshttp://articles.economictimes.indiatimes.com/2012-07-19/news/32747211_1_power-sector-power-rates-power-utilitieshttp://articles.economictimes.indiatimes.com/2012-07-19/news/32747211_1_power-sector-power-rates-power-utilitieshttp://profit.ndtv.com/Interviews/Article/india-won-t-have-much-coal-by-13th-plan-sushil-kumar-shinde-308055http://www.hindustantimes.com/India-news/NewDelhi/Power-capacity-target-hinges-on-coal-land-links-Shinde/Article1-890770.aspxhttp://business-standard.com/india/news/calltata-poweradanis-rate-hike-plea-deferred/480951/http://online.wsj.com/article/SB10001424052702304039104577534420439925062.html?mod=googlenews_wsjhttp://business-standard.com/india/news/12th-plan-power-capacity-target-cut-to-88000-mw/480745/http://economictimes.indiatimes.com/news/news-by-industry/energy/power/power-ministry-agrees-for-coal-price-pooling-model/articleshow/15053004.cms

power sector - monthly update - july 2012

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