This season, power producers are facing an uphill struggle to keep factories running. The scarcity of fuel and the rupee depreciation that made imported fuel more expensive—even as power utilities run up debt to build new or complete the construction of already commissioned factories—have almost extinguished profitability.
In the quarter ended December, Adani Power Ltd reported that it generated 3,381 million units of electricity compared with 1,931 million a year ago. That was about all the positive news it had. While that does represent a 75% increase in power generated, it hides the problems the company faced.
The average plant load factor (PLF), or capacity utilization, was 66% in the three months ended December compared with 85% a year ago. It was also a major comedown from the 75% PLF in the September quarter.
With state electricity boards not wanting to buy expensive power and “non-availability of transmission line”—a reason put forward by the company—average realizations are dipping. Average realization in the December quarter was Rs 3.51 per kilowatt-hour, about 11 paise less than what it had accomplished in the September quarter.
Graphic by Yogesh Kumar/Mint
Although Adani Power has put on hold some capacity expansion plans, newer factories have added to depreciation costs. Wear and tear costs have more than tripled from a year ago, while fuel costs more than quadrupled. This overwhelmed the 110% increase in sales. Add to this a forex loss of Rs 205 crore loss and Adani Power reported a loss of Rs 358 crore in the December quarter.
Also See | Downward Trip(PDF)
The path ahead is a bit dark. After losing a legal battle in Gujarat, where it wanted go back on its agreement to supply power to the state electricity board because it couldn’t tie up the desired coal supply at cheaper rates, Adani Power has filed a similar appeal in Maharashtra.
The December quarter numbers also indicate that Adani Power has taken a fair share of hit after a change in Indonesian government’s rules increased coal costs, even though it was earlier believed that most of the burden would be borne by its parent Adani Enterprises Ltd.
Also See | Quarterly Performance (PDF)
Although the stock climbed about 2% on Monday, it is likely that it won’t outperform the power index on BSE anytime soon.