India Electricity Prices are Spiking
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India spot electricity prices surged on Q3 demand, lifting power tariffs in the spot market as discoms scrambled for supply; Sembcorp SGPL boosted PLF and short-term PPA realizations, benefiting from INR per kWh peaks.
How It All Fits Together
India spot electricity prices hit Q3 records amid demand spikes, lifting tariffs and aiding Sembcorp SGPL via PLF gains.
Q3 spot avg 10.6 c/kWh (INR 5.1); 15-min peak 20.7 c/kWh (INR 9.9)
Spike driven by DISCOM demand, coal imports, domestic coal shortfalls
SGPL core loss seen 30-40% lower; PLF ramped above 90% in Q3
Prices eased to 7.1 c/kWh, but may stay elevated on structural support
Electricity prices in India, now the third-largest electricity producer globally, bolted to a record high of 10.6 cents/kWh (INR5.1/kWh) in Q3.
A jolt in Indian spot electricity prices could save Sembcorp Industries' Indian business from further losses, even though demand has occasionally slumped in recent years, UOB Kay Hian said.
The firm said spot electricity prices in India bolted to a record high of 10.6 cents/kWh (INR5.1/kWh) in Q3 and even hit a 15-minute peak of 20.7 cents/kWh (9.9/kWh). The spike was due to a power supply crunch on higher electricity demand from power distribution companies, alongside higher imported coal volumes as domestic supplies shrank.
As an effect, Sembcorp Industries' Sembcorp Gayatri Power Limited's (SGPL) losses of $26m in Q1 and $29m in Q2 could narrow down by as much as 30-40%.
On a net basis, SGPL will recognise a significantly higher electricity tariff in 3Q17. By tactically shutting down its Unit #3 for maintenance, Unit #4 effectively had its generation contracted out at the higher short-term PPA tariff of around 7.3 cents/kWh (Rs3.5/kWh).
SGPL also capitalised on the price spike in 3Q17 as it ramped up its plant load factor (PLF) to more than 90%.
“On the back of this, coupled with the effects of reduced finance costs, we expect SGPL’s 3Q17 quarterly core loss to shrink by 30-40% from previous quarters,” UOB Kay Hian said.
Whilst electricity prices have corrected to 7.1 cents/kWh (INR3.4/kWh), the firm said it could still remain elevated on structural factors, even as coal and electricity shortages ease nationwide.
Sembcorp Industries' India operations brought in a robust performance for Q3. PLF for Thermal Powertech Corporation India Limited (TPCIL) hit 91%, whilst it reached 73% for SGPL, echoing the broader trend of thermal PLF up across the sector.
