March 8, 2018

Power Industry Analysis

ALWAYS – INVEST IN WHAT YOU KNOW & WHAT YOU CAN UNDERSTAND. DEVELOP CURIOSITY AS A TRAIT

Power Industry Analysis

Must know facts:

  • India with a production of 1,006 terawatt hours (TWh), is the fifth largest producer and consumer of electricity in the world.
  • In India sources for power generation range from commercial sources such as coal, lignite, natural gas, oil, hydro and nuclear power to other viable non-conventional sources such as wind, solar, and agriculture and domestic waste.
  • The key components of Power sector include Renewable Energy, Wind Energy and Solar Power.

 

Influencing Factors for price change:

  1. Individual Stocks in Power sector are best judged when benchmarked against – ‘NIFTY ENERGY’, ‘S&P BSE POWER’ indices.
  2. Government initiatives like ‘electricity for all’  – ‘Saubhagya Yojana’, to provide electricity to all 29,376 villages, can be a major boost factor depending which region its catering to & companies present in that region.
  3. Government’s move in promoting coal gasification to convert high ash coal into methanol that can be used as cooking gas and transportation fuels.
  4. Wind energy is the largest renewable energy source in India, so any government initiatives on any of the above sources of power generation will trigger momentum in stocks.

 

Understanding the Industry:

The power sector in India is mainly governed by the Ministry of Power. There are three major pillars of power sector these are Generation, Transmission, and Distribution. As far as generation is concerned it is mainly divided into three sectors these are Central Sector, State Sector, and Private Sector.

Electricity demand in the country has increased rapidly and is expected to rise further in the years to come. In order to meet the increasing demand for electricity in the country, massive addition to the installed generating capacity is required. In September 2017, the Government of India launched the Saubhagya scheme to provide electricity connections to over 40 million families in rural and urban areas by December 2018 at a cost of US$ 2.5 billion.

 

Estimated Market Size:

Indian power sector is undergoing a significant change that has redefined the industry outlook. Sustained economic growth continues to drive electricity demand in India. The Government of India’s focus on attaining ‘Power for all’ has accelerated capacity addition in the country. At the same time, the competitive intensity is increasing at both the market and supply sides (fuel, logistics, finances, and manpower).

Total installed capacity of power stations in India stood at 330,860.58 Megawatt (MW) as on December, 2017.  The Ministry of Power has set a target of 1,229.4 billion units (BU) of electricity to be generated in the financial year 2017-18. The annual growth rate in renewable energy generation has been estimated to be 27 per cent and 18 per cent for conventional energy.

 

Road Ahead:

As quoted in India Brand equity foundation – The Government of India has released its roadmap to achieve 175 GW capacity in renewable energy by 2022, which includes 100 GW of solar power and 60 GW of wind power.The Union Government of India is preparing a ‘rent a roof’ policy for supporting its target of generating 40 gigawatts (GW) of power through solar rooftop projects by 2022.

 

Top Stocks in the industry:

NTPC, Power Grid Corp, Tata Power, Reliance Power, Adani Transmission, KEC International.. many more.

(Please note above stocks are not recommendations, they are purely for information purpose only)

 

Information Source / References: IBEF, Ministry of Power,The Economic Survey 2016–17 & 17/18, Agricultural and Processed Food Products Export Development Authority (APEDA), Department of Commerce and Industry, Union Budget 2017–18, Press Information Bureau, Ministry of Statistics and Programme Implementation, Press Releases, Media Reports,

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