Tariff hike hope lifts power stocks

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In a largely flat market this week, power sector stocks have had an energised run.

On Thursday, Tata Power closed at Rs 104.55 on the BSE, up 1.85 per cent after rallying nearly five per cent intra-day. This was after the Central Electricity Regulatory Commission (CERC) asked buyers of electricity to submit their response in one week on the tariff hike proposal of Coastal Gujarat Power Ltd, a subsidiary of Tata Power.

Due to the rise in the cost of imported coal, Tata Power had approached CERC asking for tariff revision for power generated from its 4,000- MW Mundra plant.

Adani Power closed at Rs 52.70, up 3.54 per cent from its previous close.

Reliance Power closed at Rs 97.95, up 2.24 per cent. There has been positive sentiment in the power sector after the Government on Monday approved the state electricity boards (SEB) restructuring package to facilitate a turnaround of the ailing distribution companies. Debt of about Rs 1.9-lakh crore is expected to be restructured under the plan.

“The Street was waiting for the power sector reforms. Power stocks have been overly sold so the positive news are resulting in buying activity,’’ said Kishore Ostwal, CMD, CNI Research.

According to broking firm Prabhudas Lilladher, “the transfer of nearly 50 per cent debt to State Government would reduce losses and per unit gap in some States by nearly 15-25 per cent.” However, it believes that strict implementation of tariff hikes and reduction of transmission and distribution losses will be the key going forward.

(This article was published on September 27, 2012)
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