Uncertainties cloud earnings visibility of key power players

Imported coal-based generating companies including JSW Energy expected to report robust growth

Fourth quarter earnings of power companies are expected to be a mixed bag.

Tata Power and Adani Power could see an uptick due to a Central Electricity Regulatory Commission order allowing them to raise tariffs. Companies using imported coal like JSW Energy are also expected to report robust growth on falling coal prices.

State-owned NTPC, however, is expected to report weak earnings on revised operational norms. The street will be looking for clarity on the impact of the new CERC rules on NTPC's profit.  HDFC Securities said in a research note the rules had reduced load factor incentives and heat rate benefits the company enjoyed earlier.

PowerGrid Corporation is likely to post strong numbers based on its commissioning performance in 2014-15.

It needs to be seen how Tata Power and Adani Power account for the tariff hikes because the CERC orders have been challenged in the appellate tribunal. NTPC, too, has challenged the CERC regulations in the Delhi High Court.

For Tata Power, whose distribution licence for the Mumbai area was renewed for 25 years up to 2039, the final orders of the Supreme Court or the appellate tribunal on the Mundra project will need to be watched. Production and realisation at the Bumi mines as well as conclusion of the stake sale are other factors that will weigh in. Low profitability in the coal business may affect its profits.

Reliance Power’s profits may be affected by fuel supply at the Rosa and Butibori projects and mining cost at Sasan. The Rosa project’s plant load factor is estimated at 82 per cent, like last year, while that for Butibori is expected at 85 per cent, up from 42 per cent in same quarter a year ago.

“Regulated players are expected to witness steady growth in profitability, while earnings of other players seem to have bottomed out. Imported coal prices and the dollar remained stable during the quarter. Tata Power and Adani Power could see an uptick in earnings on the CERC order,” said  Shankar K, associate director at Edelweiss Securities.