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Business News/ Markets / Stock Markets/  NTPC, Power Grid, NHPC: new CERC regulations slightly positive for generation firms, mildly negative for transmission

NTPC, Power Grid, NHPC: new CERC regulations slightly positive for generation firms, mildly negative for transmission

Stock market today: NTPC, NHPC share prices saw gains of up to 3.5% in intraday trades on Monday. Final regulations for 5 years period beginning in April 2024 announced by the CERC are considered positives for generation projects while mildly negative for new transmission projects post April'2024

NTPC and NHPC share prices saw gains of up to 3.5% in morning trades on Monday. Premium
NTPC and NHPC share prices saw gains of up to 3.5% in morning trades on Monday.

NTPC and NHPC  share prices saw gains of up to 3.5% in the intraday trades on Monday. Power Grid Corporation of India share price though opened in positive zone nevertheless saw some decline thereafter .

On the positive side the over hang on any major changes regulations by the power regulator is ,largely behind and there is little change in new regulations given by CERC (Central Electricity Regulatory Commission) compared to the draft, said analysts.

The final regulations for the five-year term beginning in April 2024 have been announced by the CERC. The final regulations have moderately increased the incentive for higher generation during peak hours while have relaxed normative plant availability for plants older than 30 years as per analysts.

 NHPC as per Kotak will benefit from a higher ROE (Return on Equity) of 17% (instead of 16.5%) for Subansiri hydroelectric project (Arunachala Pradesh)  and Parbati II Hydropower project (in Himachal). 

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Overall, the regulator has maintained regulatory certainty, in line with our expectations and the draft regulations, said Kotak analysts.

Analysts at Nuvama Institutional equities find the  granular changes benefitting thermal. Overall regulations as per Nuvama analysts are positive for NTPC  and they expect  1.5–2% higher core Return on Equity for NTPC. 

In the generation segment overall ROE are same as draft for thermal power as per Nuvama and there is no change. On the other hand ROE is up from 16.5% to to 17% for storage hydropower.  

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Nevertheless there is 0.5% RoE cut on regulated transmission projects commissioned after April 2024, which is perceived by the markets as mildly negative for Power Grid Corporation. However analysts highlight that there there is no impact on older projects. Also analysts at Kotak Institutional Equities said that they see a limited impact of the regulations on Power Grid Corporation as most incremental assets will come under the competitive bid structure.

Rupesh Sankhe Research Analyst at Elara Securities (India) Pvt Ltd said that the final regulation is in line with the draft, with a few adjustments to the normative plant availability factor (PAF) for capacity charge recovery and normative plant load factor (PLF) for PLF incentive. 

The incentive for off-peak power has been raised by 5 paise per . Sankhe said that "We believe the final regulation will have a favorable impact on NTPC, NHPC, and SJVN while they are expected to have a limited impact on Power Grid

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions


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Ujjval Jauhari
Ujjval Jauhari is a deputy editor at Mint, with over a decade of experience in newspapers and digital news platforms. He is skilled in storytelling, reporting, analysing and writing about stocks, investment ideas, markets, corporates and more. He is based in New Delhi.
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Published: 18 Mar 2024, 03:00 PM IST
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