BackElectricity demand, shortage hit record
Power demand started picking up in July after remaining sluggish in the June quarter due to unseasonal rains and weather disturbances
PremiumNEW DELHI : Electricity usage that began rising in July touched record levels of demand in August as rains waned, driving stocks of power companies to new highs. As demand surged, power shortage also shot up.
According to data from the Grid Controller of India, the country saw a record peak shortage of 9.11 gigawatts (GW)—or over 4% of the peak demand—on 21 August, when peak demand was 226GW. Generation outage, or the unoperational generation capacity, stood at 51.65GW that day. A few days ago, on 17 August, peak demand hit a record 234GW, with a peak shortage of over 7GW.
Demand is expected to rise further in the months ahead as rains recede with a strengthening El Nino, focusing attention on coal stocks vital to thermal power production. Power plants have domestic coal stocks for 11 days, showed data from the National Power Portal, down from 13 days in March. Vikram V., vice president and sector head, corporate ratings, Icra Ltd, said efforts need to be taken to ramp up stocks. The government last week directed plants using imported coal to continue operating at full capacity till October.
The demand surge has aided investor sentiments too. Shares of Tata Power Co. Ltd touched 52-week high last week, following peers such as JSW Energy Ltd, NTPC Ltd and NHPC Ltd, which too have seen 52-week highs in August. Many other power companies also have seen smart gains, as indicated by the 4.7% gain in the S&P BSE Utilities Index since 17 August, when peak demand touched a record.
Power demand started picking up in July after remaining sluggish in the June quarter due to unseasonal rains and weather disturbances. During the April-July period, it was up 2% from a year earlier and in July, it was up 6% year-on-year (y-o-y), reversing the trend of a decline in the first quarter demand, said analysts at Jefferies India Pvt. Ltd. The June quarter demand was impacted by weaker residential demand, given the unseasonal rains, and also saw lower usage of air conditioners and air coolers, said analysts.
Demand picked up further in August. According to Rupesh Sankhe, a senior analyst at Elara Capital, the overall demand trend remains healthy and during the current fiscal year till 22 August, cumulative demand now is up 9% y-o-y.
The rise in power demand is expected to help the Q2 performance of power producers. The Q1 performance by public sector undertakings was a mixed bag, with strong 12% y-o-y net profit growth for NTPC and a decline of 5.9% for Power Grid.
“NTPC’s earnings were supported by a 12% y-o-y increase in regulated equity base, while Power Grid Corp. of India Ltd’s earnings was impacted by lower transmission income for the previous period, steep fall in earnings from the consultancy business, and continued subdued trend of asset capitalisation," said analysts at Sharekhan by BNP Paribas.
Private sector companies also reported a mixed performance, impacted by lower offtake in the spot market.
Tata Power saw a 22% rise in net profit to ₹972 crore; however, this was led by lower under-recovery at the Mundra Ultra Mega Power Project, a favourable regulatory order ( ₹102 crore) in Maithon Power, and exceptional gains of ₹235 crore led by a deemed gain on dilution of stake in Tata Projects. Before exceptional items, net profit grew just 3% y-o-y. JSW Energy’s net profit declined 34% y-o-y.
On an aggregate basis, June quarter revenue and profit growth of power companies was almost flat year-on-year, said analysts at Axis Capital. However, this may pick up as as power demand picks up pace.
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