Power scrips extend gains on coal supply

Tata Power, India’s biggest private utility, and rivals including Adani Power gained a second day on expectations that shortage of coal for power generation plants will ease after signing purchase agreements.

Tata Power added 2.6 per cent to Rs 113.4 on the Bombay Stock Exchange (BSE) on Thursday. The stock gained 5.9 per cent yesterday. Adani Power climbed 3.7 per cent to Rs 81.6, after rising a record 14 per cent yesterday. The BSE Power Index, a measure of 19 Indian companies, rose 1.4 per cent.

Coal India Ltd, the world’s largest producer of the commodity, will sign agreements with the nation’s utilities for the first time since 2009, according to a statement yesterday on the Prime Minister’s website. The accords will increase coal supplies to projects due for completion by March 2015 and those constructed by December 31.

“The confirmation that Coal India will sign the agreement for a higher supply is a big boost for power companies,” said Deven Choksey, managing director at Mumbai- based K R Choksey Shares & Securities. “With the coal supply concerns getting addressed, it seems the worst is behind us for the power sector.”

The agreement will benefit power plants with a combined capacity of an estimated 50,000 Mw, according to the statement. That’s equivalent to about 27 per cent of the country’s current installed capacity.

Coal India will arrange alternative supplies, including imports, if its domestic production isn’t enough to meet commitments. It reported a 2.8 per cent drop in output to 291 million metric tons in the nine months ended December 31. Coal India fell 5.4 per cent to Rs 321.