CLSA underweight on power, sees 'tough times ahead'

Mumbai: India’s power sector could see “tougher times ahead”, brokerage CLSA said in a note on Monday, adding that it was underweight on the sector.

The brokerage attributed the negative forecast to depleting inventory of key raw material coal, which has forced several power stations to operate at extremely low stock levels,

As many as 29 power stations, of the 86 coal-based power projects in India, are currently operating with less than 4 days coal stock and 44 with less than 7 days stock, CLSA said.

[caption id=“attachment_109608” align=“alignleft” width=“380” caption=“Coal India, the world’s biggest coal miner, produced 8 percent less in the September quarter. Reuters”] [/caption]

India’s power supply situation will improve in the next four-five days as coal supply to power plants is slowly picking up, Power Minister Sushil Kumar Shinde said on Friday.

Coal production in India has been impacted by heavy rains in Orissa and strikes in Singareni Collieries Company Ltd, which contributes to nearly 10 percent of India’s coal production.

Coal India, the world’s biggest coal miner, produced 8 percent less in the September quarter while despatches fell 5 percent on year.

“The coal despatch by road is likely to be impacted in third quarter as well given the damage to haul roads because of the heavy rains,” CLSA said.

Due to a coal shortage, CLSA expects merchant tariffs to “shoot up” in the interim, benefitting Jindal Steel and Power, JSW Energy, Lanco Infratech and Adani Power.

CLSA pegged Power Grid as the “safest play” in the sector, followed by NTPC and Tata Power. “Avoid all others,” it added.

Reuters