Emkay: Power Sector Update; CERC draft regulations FY15-19; huge negative for NTPC

Power - CERC draft regulations FY15-19, huge negative for NTPC

- CERC has announced its draft tariff regulations for FY15-19. The regulations tighten the operating norms across all parameters for both power generating and transmission companies

- We see huge negative impact for NTPC mainly from shift of incentives to PLF from PAF and no tax grossing up of RoE. However, we see lower impact for PGCIL, NHPC and SJVN

- These regulations if implemented would impact FY15 EPS by 12-14% for NTPC, 6-8% for PGCIL, 3-4% for SJVN, and 1-2% for NHPC. Though the final regulations are expected by Jan/Feb 14, we expect the stocks to react negatively

- The final regulations could be different from the draft as has happened in the past, however given the quantum of negative impact is high compared to previous draft regulations that even if the norms are relaxed a bit it would still be negative.

Source : Equity Bulls

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