Electrifying Performance

Updated: Oct 19 2003, 05:30am hrs
With Diwali - the festival of lights, around the corner, power utility stocks seem to have lightened up notably on the bourses. And, given the current uptrend in the economy, a reasonably good monsoon along with the feel good factor, the festive mood is expected to be frenzied if not longer this time around. All these factors point at better days ahead for the sector.

Understandably so, the power utility stocks namely Reliance Energy (formerly BSES), Tata Power, CESC, Surat Electricity, Ahmedabad Electricity and Gujarat Industrial Power Corporation (GIPCL) have outperformed the benchmark indices sizeably.

While the Sensex has gained 10.7 per cent to its current level at 4930.53, the power utility stocks have gained in the range of 11 per cent to 86 per cent. CESC has packed in maximum gain of 86 per cent in its stock price to Rs 86.55 over its September 30 level, whereas Reliance Energy (formerly BSES) scrip rose 11.3 per cent to Rs 420. Tata Power, the other power utility major, gained 21.5 per cent to Rs 224. Interestingly, scrips of Surat Electricity, Ahmedabad Electricity and GIPCL all from the state of Gujarat have gained in excess of 24 per cent.

Analysts are optimistic about the power sectors performance in the near future citing goverenment initiatives and strong fundamentals as catalysts for future growth. The enactment of Electricity Bill - 2003 kick-started the growth phase. The new Bill along with Accelerated Power Development and Reform Programme (APDRP) are seen to be strengthening sector fundamentals. Under the new power policy the governments focus has been at restoring the financial health of sector players and ensuring the operational soundness of the countrys T&D infrastructure. This is likely to lure private investors back into this sector. Already a few projects have been announced by the private sector. A case in point is Torrent that plans a 1,000 mw power plant.

Another example would be CESC, the Kolkata based power utility company that has benefited from the recent changes in power policy. It has been allowed by the West Bengal Electricity Regulatory Commission to recover Rs 540 crore in tariff arrears for FY01 and FY02. As a result of this it could attract more investment in the form of preferential allotment of 3.3 million shares aggregating Rs 16.4 crore that has helped it to carry out debt restructuring plan.

Reliance Energy that has announced its second quarter results to September 2003, showed marked improvement in its performance. The company has posted a 134 per cent rise in net profit at Rs 88.8 crore on a total income of Rs 808.5 crore, up 8.6 per cent. During the half year to September 2003 the company has brought down the electrical energy purchased from external sources by 15 per cent to 1,569 million units. The reduction in purchase of power is attributable to the increase in the units generated at REL power station at Dahanu. The company has Rs 10,000 crore expansion plan.

Tata Power that will come out with its second quarter performance soon is also expected to do well. The company will be marking its re-entry into Sensex from November 10. During the first quarter to June 2003 the company clocked 19 per cent growth in net profit to Rs 99.4 crore on a net sales at Rs 1,082 crore, up four per cent. The company plans to increase power generation capacity by 1,500 mw in the next five years.

Recently, RV Shahi, the Union power secretary, has said that, the power sector is looking up as 11 state electricity boards reported reduction in losses to the tune of Rs 5,000 crore during the last two years and the public-sector companies increasing their recoveries. The collection rate (recovery of current dues) of National Thermal Power Corporation (NTPC), Power Grid Corporation (PGC) and National Hydro Electric Power Corporation (NHEPC) has increased significantly and is ruling above 90 per cent. Clearly the power sector have been deriving advantage from the scheme introduced by the government.

Generating companies are likely to benefit from the introduction of open access in transmission and distribution. Generating companies such as NTPC may like to sell power to anybody as part of open access policy. National grid that is expected to be ready by 2012 may pave the way for an inter-regional trading of power of about 33,000 mw. To exploit potential NTPS plans to add 5000-mw capacity in the near future.