NTPC, Power Grid, NHPC: new CERC regulations slightly positive for generation firms, mildly negative for transmission
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).
Also read- Summer stocks: Power, FMCG, consumer durables and 2 other sectors set to soar with rising temperatures; check top picks 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. Also Read- Ambuja, Bharti, SBI, L&T, Zomato among top 11 picks by Jefferies for 5 years Nevertheless there is 0.5% RoE cut on
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