2018 marked the turnaround of the thermal power sector. A steady rise in demand began pushing up utilization levels, and as fuel supplies lagged demand, prices in the spot electricity market shot up. But insufficient coal and high maintenance shutdowns weighed on earnings, leading to subdued performance of shares of power companies.
Even so, an earnings rebound is now increasingly looking likely. First, demand has continued to perk-up. Thermal power generation between April and November is up 5%, slightly higher than the growth in the year ago period. Fuel supplies are improving, even though only incrementally.
Importantly, draft regulations for the next regulated period—FY20-FY24—adopted an accommodative stance, brightening the outlook for regulated utilities. It proposes that regulated utilities can continue derive a 15.5% return on equity Read More
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