Power companies, except for a few players, may report a pretty bad April-June quarter on account of lower demand and rupee depreciation.
Analysts said due to a continued slowdown in the economy, the demand for power had fallen in April and May despite it being a peak summer season. The situation was compounded by early onset of monsoon which saw even lesser demand in June.
This led to the already cash-strapped state electricity boards buying lesser power, Also, the addition in generation capacity to increased the woes of power producers.
According to a report by analysts Nalin Bhatt and Aditya Baheti from Motilal Oswal Securities, the April-May 2013 power generation was up 4.5% on a year-on-year basis, while plant load factor dipped 3.24%. This led to a decline in power deficit, which fell to 6.9% for April-May 2013 as against 7.8% year on year.
PLF refers to the capacity utilisation or efficiency of a power plant.
Raghavendra Upadhyaya, senior vice-president, Independent Power Producers Association of India (IPPAI), said in the last three months’ merchant tariffs, which were once an attractive bet for power firms, fell to almost Rs 2.30 per unit from the high of Rs 5-6 a year ago.
In fact, companies such as Tata Power and Adani which were supposed to benefit from a falling imported coal price saw their gains eroding due to rupee depreciation and a huge foreign debt exposure.
“With the rupee depreciating almost 7% in the last month and nearly 15% in the last three, major power players which have taken dollar-denominated loans will take a hit on imported coal prices and interest payments on loans,” said Rupa Shah, analyst with brokerage Prabhudas Lilladher, in a report.
JSW Energy will see a positive impact of falling imported coal prices as its foreign debt exposure is very less. With increased capacity, PowerGrid, too, will post a stellar performance.
Others, especially Adani Power, Reliance Power and GMR Energy, are expected to report a mere 10% year-on-year rise in profits or even less.
However, the next quarter is expected to be good merchant tariffs have started increasing and elections are approaching.
“We remain sanguine on merchant tariffs averaging Rs 4-4.5 per unit, especially in the South, given that longer-term tariffs have now moved up significantly,” said analysts Abhishek Puri and Manish Saxena from Deutsche in a report.
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