Monthly Power Update - all India generation was up 5% in October 2011 - BRICS Research

All India generation was up 5% in October 2011, as growth across hydro and nuclear generation and moderate performance in coal generation was partially offset by lower generation across gas plants. PLF improved in hydro and nuclear plants but declined for gas and coal due to fuel supply constraints. Coal supply position deteriorated in October with 47 of 85 plants facing subcritical inventory level v/s 27 yoy, following lower coal production due to monsoons and strikes at few mines. Power deficit in October remained high as generation was impacted due to fuel shortages, reflected in high merchant rates. Capacity addition during October 2011 was only 345MW, against set target of 2,373MW. We expect ~53GW to be added in Eleventh Plan period v/s original target of 78.4GW.

Power generation: Generated power increased 5% yoy in October 2011 helped by healthy growth in hydro and nuclear sectors, which compensated for lower generation in gas plants. Coal generation was up only 4.5% due to coal shortages as heavy rains and workers' unrest across few mines impacted productivity. Hydro generation was up 14.4% and nuclear 17.9%, while gas was down 3.2% yoy. Growth in nuclear and hydro was driven by better fuel availability and impressive monsoons repectively.

Key companies: NTPC's total generation declined 6.5% yoy in October 2011, mainly due to 7.1% decline in coal generation due to fuel supply constraint as strike in Singareni coalfield and heavy rainfall affected production and supply of coal. Adani and JSW have reported better growth due to capacity additions; however companies with gas-based plants like GMR, GVK and Lanco have seen declines due to lack of ramp-up in gas supply.

PLF: Nuclear PLF was up at 78% in October 2011 v/s 69% yoy, boosted by increased fuel imports, while better monsoons boosted hydro PLF to 42% from 38%. However, gas-based PLFs declined to 66% from 69% yoy and coal PLFs fell to 68% from 73% due to fuel supply constraints. Consequently, energy deficit in October 2011 rose to 9.6% from 6.6% in September 2011, resulting in higher merchant rates.

Coal production/prices: Following slowdown in coal output, 47 plants reported sub-critical levels of coal inventory (out of total 85 plants) in end of October 2011 compared to 27 yoy. We continue to expect shortage in coal for FY12 with CIL downgrading its production estimates and lower production in H1FY12. International coal prices has corrected slightly to US$106 (flat yoy) but landed cost are still up 16% yoy due to rupee depreciation.

Capacity: Capacity addition in October 2011 was only 345MW, below set target of 2,373MW for the period. YTDFY12 the industry has added 9,063MW capacity (including renewable energy capacity) against a target of 12,041MW (75% of target). In Eleventh Plan period till date, the industry managed to add ~49GW (including renewable) v/s targeted 75GW achieving 65% of targeted capacity. We expect capacity addition in Eleventh Plan to fall short of targeted 78.4GW by ~25GW.

Source : Equity Bulls

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