Power shares in demand; Adani, Torrent, CESC rally up to 10% on July 9

Analysts expects the new power minister to continue focusing on infrastructure upgrades, transformer replacements and improving the financial condition of power discoms

Shares of power companies were in demand on Tuesday as they rallied up to 10 per cent on the bourses. The optimism comes as analysts anticipate policy reforms and new initiatives in the power sector to continue under Modi 3.0.

CESC, Adani Power and Torrent Power rallied between 5 per cent and 10 per cent. NHPC, Adani Green Energy, Bharat Heavy Electricals (BHEL), Tata Power, and ABB, meanwhile, from the BSE Power index gained in the range of 1 per cent to 3 per cent.

At 09:51 AM, the BSE Power index was up 1.04 per cent as compared to 0.21 per cent gain in the BSE Sensex.

 

Among individual stocks, CESC hit a record high of Rs 189.10 as they rallied 10 per cent on the BSE in Tuesday's intraday trade on reports that the company had issued notice to consumers, stating that an additional 5.7 per cent would be levied on account of fuel and power purchase adjustment surcharge (FPPAS) in the bill for June. This is the realisation of additional cost incurred by the utility on coal to generate power and purchase additional power to meet the demand.

As per reports the gross power tariff of Rs 7.33, after accounting for the FPPAS as on July 2, was one of the lowest among metros including Delhi, Mumbai, Ahmedabad and Bengaluru. CESC, however, clarified that there has been no tariff revision for seven years, reports said.

That apart, shares of Torrent Power surged 5 per cent to Rs 1,548.70 after the company said its subsidiary Torrent Urja 14 (TU14) will set up solar projects of up to 50 MW to supply clean power to ARS Steels & Alloy International (ARS).

The Subscription and Shareholders' Agreement (SSSA) has been signed by Torrent Power, ARS and TU14 for the supply of power from by development of up to 50 MWp solar power generating projects in Tamil Nadu through open access from the project of TU14 to the production units of ARS, Torrent Power said in a BSE filing on Monday. READ MORE

Meanwhile, with power demand growing at a 7 per cent CAGR and peak deficit increasing accordingly, the government is likely to prioritise incentivising private sector investments in large-scale battery energy storage systems. Transmission, generation and distribution segments may also see renewed emphasis, according to analysts at Elara Capital.

The brokerage firm expects the new power minister to continue focusing on infrastructure upgrades, transformer replacements, improving the financial condition of power distribution companies (discoms), and prioritising the expansion of renewable energy sources (solar, wind, green hydrogen).

"Considering the projected electricity demand compared to the current power supply position, thermal power plants are expected to operate at higher plant load factor (PLF). Gas-based plants play a crucial role in balancing renewable energy intermittency and flexibility to meet peak demand," said Torrent Power in its FY24 annual report.

With the government's strategic push toward a 'gas-based economy'; despite geopolitical tensions affecting gas prices, the medium to long-term outlook for gas-based plants remains positive. Additionally, range-bound liquefied natural gas (LNG) prices further support improved PLFs, the company said.

India is focusing on strengthening the power sector through various policies, targets, and reforms to ensure that both generation capacity and the transmission & distribution infrastructure are augmented in a timely manner, to be able to support the nation’s growth aspirations while meeting long-term sustainability goals. The Indian government’s estimates project a 6.2% compounded annual growth rate in power demand, which is set to double by FY 2031-32 as compared to the all-India demand in FY 2020-21, Adani Power said in its FY24 annual report.