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Companies to see more gains as India's power demand surge continues

The power demand for the quarterly period of October-December 2023 was 10 per cent higher than the previous year

Energy, Power Generation, Electricity, Coal, Thermal Power
JSW Energy and Adani Power, both with sizable capacities in the merchant power segment, reported improved earnings in the previous quarter | Photo: Bloomberg
Amritha Pillay Mumbai
4 min read Last Updated : Feb 29 2024 | 7:17 PM IST
With a double-digit surge in India’s power demand, capital goods to ports have reported early gains, a trend that is likely to continue, according to industry executives and analysts.

The power demand for the quarterly period of October-December 2023 was 10 per cent higher than the previous year.

It grew 9 per cent year-on-year (Y-o-Y) during the nine months of the current financial year.

A significant portion of this demand was met through thermal power generation. Not just power companies, but others with exposure to merchant power and port operations to move coal are cloaking early gains.

JSW Energy and Adani Power, both with sizable capacities in the merchant power segment, reported improved earnings in the previous quarter.

Both companies noted that merchant power sales partly contributed to their earnings growth. For JSW and Adani, the gains extend beyond their power units.

Volumes for JSW Infrastructure and Adani Ports and SEZ saw a fillip, with coal volume growth as one of the contributors.

Varun Gogia, assistant vice-president and sector head at ICRA said for the nine months of FY24, thermal coal port volume has seen a growth of about 12.7 per cent from a year ago.

“The decline in coking coal volumes has been offset with a rise in the thermal coal volumes in this year so far. With increasing coastal coal movement and continued reliance on imported coal for thermal power, we expect coal volumes through the port to remain healthy,” he said.

Of this, Adani Ports is expected to particularly see higher gains, some of it already reflected in its coastal coal movement operations.

The company expects close to 5 million tonnes of coastal exports and 8 million tonnes of coastal imports at its multiple ports combined for the next financial year, as noted in an analyst call.

For the nine months of FY24, Adani Ports said incremental coastal coal volumes were at 10.4 million tonnes, a segment it has reported for the first time.

On the east coast, the ports of Paradip, Dhamra, Karaikal, and Gangavaram are likely to gain with the rising focus on coastal movement of thermal coal.

For Paradip alone, the coastal movement of coal was up 50 per cent in FY23,” Gogia said.

Adani Ports operates three of the four ports that Gogia listed.

India’s rise in power demand, and particularly peak power demand, has made some time-windows of the exchange traded market lucrative.

This, in turn, is building revenues for certain non-power companies. For Q3FY24, analysts with Nuvama noted that Shree Cement’s power revenue was at ~350 crore, with an Ebitda margin of 10 per cent.

 Executives from Balrampur Chini in a call with analysts noted this maiden sale in the merchant power market, “is proving to be a cash-positive exercise.”

India Energy Exchange (IEX) said that with the increase in the country’s energy consumption, there has been a corresponding rise in trading volumes on the exchange.

For the October-December 2023 period, IEX saw a 16.9 per cent Y-o-Y rise in the overall volumes.

The exchange further noted it has registered its highest-ever total volumes this January.

Even as other private power producers such as Tata Power maintain they will not add fresh thermal capacities, Adani Power has increased its bet on the coal play. The company has already announced plans to expand its current 15,250 MW capacity to 21,150 MW.

Capital goods company Bharat Heavy Electricals Limited (Bhel) is also emerging as a direct beneficiary of such announcements, as its competitors Larsen & Toubro and others continue to show restraint in thermal power unit contracts.

Analysts noted Bhel’s order inflow for Q3FY24 was at ~36,048 crore, up 137 per cent from a year back.

Nuvama expects Bhel to annually add incremental order inflow of ~40,000-45,000 crore in the power segment, with the new cycle of thermal orders.

Topics :power demand forecastPower Sectorenergy sectorenergy demand

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