CERC relief sends NTPC Limited, Power Grid shares soaring


CERC relief sends NTPC Limited, Power Grid shares soaring

Shares of NTPC Ltd and Power Grid Corp. of India Ltd gained 1.7% and 3.7% on Monday after the sector regulator proposed continuation of current incentives.

In a positive surprise, the draft note from the Central Electricity Regulatory Commission (CERC) suggests continuation of the 15.5% regulated return on equity (RoE) for generation and transmission companies.

The regulated RoE has been maintained despite a noticeable reduction in interest rates. Tariff regulations are set every five years. When they were announced in early 2014, the benchmark 10-year government bond yield was at 8.8%. It’s now at 7.4%.

Tracking this, most analysts were pencilling a cut in RoE. Despite the rise in bond yields in the past year, nobody was expecting continuation of the RoE at the current level. Read More

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