Reform concerns trip power stocks

Manmohan Singh stand on Andhra power plan sets alarm bells ringing

Select power segment stocks were under selling pressure yesterday on concerns that a Congress-led government at the Centre may delay power sector reforms.

Among the major losers on the Bombay Stock Exchange (BSE) were Bharat Heavy Electricals Ltd, which ended 7.74 per cent down to close at Rs 436.40 and Reliance Energy, down 7.56 per cent down at Rs 525.29

Stocks such as Tata Power, Power Trading Corporation and Alstom Power were also under selling pressure ending 0.5-2 per cent lower on the BSE.

Market analysts said the selling pressure in power stocks was the result of Dr Manmohan Singh justifying the Andhra Pradesh government's plan to provide free power to farmers at a press conference today. However, Singh said that Andhra was a one-off case.

A research head at a domestic broking firm said, "Power stocks which had recovered smartly after Monday's crash witnessed selling pressure as the new government's keenness to provide free power was taken negatively by the markets." "However, from a long-term prospective, I expect the power reforms to take place, resulting in better positioning of companies."

Power stocks had been among the first to tumble when the markets tanked recently. In the last one month power stocks have crashed in the range of 14-30 per cent.

 

Gloomy run - Share price on BSE in Rs
	Apr 20,  '04	May 20,  '04	% Chg
Ahmedabad Electricity	100.55	86.00	-14.5
Alstom Projects	115.35	88.20	-23.5
CESC	111.15	87.40	-21.4
Gujarat Ind Power	58.30	49.45	-15.2
Neyveli Lignite	64.50	48.40	-25.0
Reliance Energy	751.35	525.29	-30.1
Surat Electricity	239.85	201.35	-16.1
Tata Power	400.95	311.50	-22.3
Thana Electric Supply Co	13.95	11.26	-19.3

Among major losers was Reliance Energy, down 30.1 per cent in the last one month from Rs 751.35 on April 20, 2004, to today's close of Rs 525.

Tata Power has lost 22.3 per cent in the last one month to today's close of Rs 311.50 as against its one-month high of Rs 400.95.

Other stocks such as Alstom Projects was down 23.5 per cent, CESC down 21.4 per cent, Neyveli Lignite down 25 per cent, Ahmedabad Electricity down 14.5 per cent and Surat Electricity ended 16 per cent down in the last one month.

Though the Electricity Act is already in place, market analysts said there are concerns over the fate of power sector reforms.

The Act pushes power sector reforms in three ways - it makes the continued existence of bundled state electricity boards conditional on the concurrence of the Centre; mandates open access in distribution apart from allowing parallel distribution systems to be set up.

It also extends the scope of captive generation to co-operative groups and associates.

The Act envisages a competitive scenario, where regulators and private power utilities play increasingly significant roles.

It provides a comprehensive yet flexible legislative framework for the sector's development.