Power sector stocks surge as Ministry extends deadline

Mumbai: On April 16th, 2024, Power Sector stocks including Tata Power, Torrent Power, and NTPC reached all-time highs today. This sector has garnered investor attention in the past year due to strong energy demand and substantial investments by both public and private companies to expand their generation capacity. The Ministry of Power extended the deadline for imported coal-based power plants to operate at full capacity until October 15, 2024, compared to the previous deadline of June 30, as per an official notification released on Friday.

This extension under Section 11 of The Electricity Act, 2003, is significant as it allows for the variable cost to be passed through, providing some relief to power plant operators. The move comes amid expectations of a peak power demand reaching 234 GW, approximately 7% higher than the 243 GW recorded in September 2023. With the Indian Meteorological Department predicting extreme heat until June and the government anticipating a peak power demand between 256-260 GW this summer, analysts are optimistic about the power sector stocks.

Building on the momentum from last year, power sector stocks continue to outperform broader indices in the current calendar year. Torrent Power, BHEL, and Tata Power have emerged as the top three gainers this year, with their stocks rising by 70%, 33%, and 31%, respectively.

Analysts' sentiments remain positive towards the sector, citing sustained electricity demand growth of over 6% in the coming years as a key driver. This outlook supports the roadmap for power capacity addition, including both renewable and conventional sources. According to a recent report from Axis Capital, their top picks in the sector include Tata Power, NTPC, CESC, and JSW, while they recommend selling Torrent Power, Power Grid, and IEX.

JM Financial also shares a positive outlook on power sector stocks, particularly due to Indian utilities' focus on enhancing their renewable energy (RE) portfolios with storage. They have a 'Buy' rating on Tata Power, NTPC, Power Grid, Coal India, JSW Energy, NHPC, Suzlon, and BHEL, while maintaining a 'Hold' rating on CESC and a 'Sell' rating on SJVN and Torrent Power.

As for Tata Power, the company is a prominent integrated power firm and a part of the Tata Group, India's largest business conglomerate. With a diversified portfolio of 14,453 MW spanning renewable and conventional energy generation, transmission & distribution, trading, storage solutions, and solar cells/module manufacturing, Tata Power is a leader in India's clean energy transition.

Approximately 39% of its total capacity constitutes clean energy generation, and the company has committed to achieving carbon neutrality before 2045. Tata Power has a comprehensive clean energy platform offering rooftop solar, microgrids, storage solutions, EV charging infrastructure, and home automation. The company has attracted global investors to support its growth and vision, partnering with public and private entities in the generation, transmission & distribution sectors in India, and serving approximately 13 million customers nationwide