Utilities : Power generation continues to moderate by Elara Capital
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Power generation continues to moderate
Power companies in our coverage are likely to report strong earnings for the quarter. Key drivers include growth in regulated equity from capacity expansion, new transmission line additions, improved hydro generation & sustained volume growth in the short-term market, and contributions from solar EPC & rooftop installation. We retain our positive outlook on NTPC, driven by increased regulated equity from thermal capacity addition, on CESC for its strategic shift towards renewable energy, and on NLC, for its expanding project portfolio.
Generation up 3% in Q3 on lower cooling demand and high base: Power generation rose by 3% YoY to 429bn units (BU) in Q3FY25, driven by the onset of Winter, which led to lower power demand. This contrasts with a 12% YoY increase in Q3 FY24. Peak demand remains steady at 224GW in Q3FY25, a 10% decline from the record highs of 250GW in May 2024. While coal-based generation held steady at 319BU, hydro generation surged by 27% to 34BU. In contrast, gas-based generation fell by 20% YoY to 5.4BU. Renewable energy generation showed robust growth, rising 14% YoY to 47BU. Year to date, power generation has increased 5% YoY to 1,387BU.
eAuction premium moderates: Global coal prices have corrected significantly due to oversupply and weak demand in China. Indonesian coal prices (6000KCAL) are hovering at USD 123/tonne vs USD 127/tonne last year. We expect eAuction premium to remain in the range of 65-70% in Q3FY25E.
Volume momentum continues on the exchanges: Electricity trading volume grew 16% YoY to 30BU in Q3FY25, driven by improved supply-side liquidity, which contributed to lower prices on the exchanges. In the Day Ahead Market (DAM), average prices for Q3FY25 stood at INR 3.71 per unit, a ~26% YoY decline due to the abundant supply availability.
Renewable energy tendering activity slows in Q3: Renewable energy tenders issued in Q3FY25 dropped by 51% YoY to 18GW. Solar tenders saw a 27% YoY decline to 11GW while hybrid tenders fell 82% YoY to 1,200MW. Firm and dispatchable tenders also decreased significantly, down 66% YoY to 2,200MW. In contrast, battery storage tenders gained traction, up 320% YoY to 1,825MW.
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SEBI Registration number is INH000000933
