Power stocks extend rally, Lanco Infra zooms 24%

Shares of power generation companies extended their rally for the third day in a row after the Prime Minister has approved suggestions made by the Secretary level Committee for solving the issue of coal deficit faced by power sector.

Most of the frontline power stocks such as BHEL, Adani Power, Reliance Power, Tata Power. Lanco Infratech, Torrent Power and JSW Energy have rallied 10-25% in past three trading days on the Bombay Stock Exchange (BSE), compared to 3% gain in the benchmark index Sensex.

According to Angle Broking, this news is positive for the power sector considering that the fuel shortage is the key issue currently faced by the sector.

As per the approved suggestions, Coal India Limited (CIL) will sign FSAs with power plants that have entered into long-term power purchase agreement (PPAs) with power distribution companies and have been commissioned/would get commissioned on or before 31st March 2015.

The FSAs will be signed for full quantity of coal mentioned in the Letters of Assurance (LoAs) for a period of 20 years with trigger level of 80% for levy of disincentive and 90% for levy of incentive.