Power: Monthly Tracker, September 2017 - Kotak

POWER DEMAND IMPROVES, CAPACITY ADDITION MODERATES

- Power demand: improved by 5.3% yoy in August 2017, North sees strong demand improvement

All-India power demand grew by 5.3% yoy growth in August 2017 (4.7% YTD), a significant improvement over the 2.5% yoy growth clocked in FY2017. Uttar Pradesh accounting for 11% of the overall demand continues to report strong improvement-22.4% yoy in August 2017. Rajasthan also reported improving trends-25.7% yoy in August 2017 followed by Maharashtra that saw 9.3% yoy growth in energy demand. South reported a decline of 1.2% yoy with Tamil Nadu and Andhra Pradesh reporting decline of 6.7% and 3.2% yoy respectively. East was also weak with West Bengal logging 6.8% yoy decline in volumes in August 2017. On the peak demand front, Rajasthan and Uttar Pradesh have shown strong growth of 31.8% yoy and 29.8% yoy in August 2017. PLFs for coal based capacities improved marginally at 55% in August 2017 even as gas-based capacities continue to operate at low utilization of 22%.

- Coal-based capacities decommissioned in August 2017, 2.4 GW capacity addition in FY2018 so far

All-India installed capacity now stands at 329 GW (+8% yoy) with 0.9 GW coal-based capacities getting decommissioned in August 2017. We highlight that after the strong showing in FY2017, we have not seen significant capacity addition in the renewable space in 1QFY18, with 1 GW of capacity addition in July 2017.

- Short-term market: drop in participation, weak realizations

- Short-term trades in May 2017 were 11.6 BU resulting in a drop in share to 10.9% on overall generation of 107 BU. Bilateral trades at 4.3 BU comprised 41% of the short-term market while power exchanges at 4.1 BU accounted for 35% of the short-term market. Rates for bilateral sale fell 10% yoy to Rs3.5/kwh in May 2017 (Rs3.6/kwh in May 2016).

- Coal: dispatches strong during the month, production volumes strengthen

CIL reported among its best monthly performance with 19% yoy growth in dispatches and 16% yoy increase in production in the month of August 2017. Coal India's dispatches to the power sector remained flat yoy in July 2017, as compared to 9% yoy increase seen in June 2017. Spot auction premiums continue to improve and now stand at 47% in July 2017. Prices of imported coal have spiked up in the past month on the back of changing production and import policies in China.

- Gas: declining generation, increase in spot prices

Gas-based generation maintained at 4 BU (-9.4% yoy) with PLFs of 22% on an installed capacity of 25 GW. Spot prices have come off to US$6.1mmbtu having risen to US$9.5/mmbtu in December 2016 and may propel demand going forward from 32 mcm/d in April 2017.

Source : Equity Bulls

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