Capex slowdown threatens to trip power firms

If the recent developments of low power deficit, reduced prices and improved fuel supply have made you think the power sector is headed for a turnaround, think again. Woes of the key infrastructure sector are far from over.

A Business Standard analysis of the investment data for 25 top listed companies, sourced from Capitaline database, reveals capital expenditure by the companies dipped 15% to Rs 1,12,687 crore in 2012-13.

Further, capex by the private sector, which is expected to infuse more than a half of the total funding in 12 th  Plan, dipped by an alarming 44% to Rs 54,000 crore, power minister Jyotiraditya Scindia said.

As power projects follow a 3-4 years cycle, the declining investment trend points at a major generation and supply crunch by the end of the current Plan in 2016-17. Experts attribute the worrisome prospects to an all-time low investor sentiment at the back of uncertain fuel supply, regulatory affairs and policy framework coupled with a financially-ill distribution sector.

The Capitaline database, compiled by Business Standard Research Bureau, calculated capex figures as the difference of the reported (unaudited) figures of Gross Block (worth of assets) and Work in Progress for 2012-13 over the previous year.

According to the data, the worst performers included infrastructure major Lanco Infratech, which saw fresh capex dipping 81% to Rs 3,360 crore; Adani Power whose capex tumbled 52% to Rs 6,771 crore; Reliance Power with capex down 42% to Rs 11,284 crore and public sector hydro major National Hydroelectric Power Corp (NHPC) which witnessed a 23% fall in capex to Rs 3,130 crore.

The performance of the companies was hit also by exchange rate fluctuations, high cost of funding and, in some cases, changing global market trends. For the largest private sector power producer, Tata Power Company, fresh investments dipped by 3% to Rs 7,635 crore as compared to Rs 7,866 crore in the previous year.

“Profit After Tax (during 2012-13) stood at Rs 1,024 crore, as against Rs 1,169 crore mainly due to lower dividends income from coal investments, higher finance charges and higher tax provisioning due to change in depreciation rates,” the company said in its annual report.

Power generator NTPC Ltd and transmission giant Powergrid Corp were the only two among the top companies which registered growth in capex last fiscal. NTPC has a current installed capacity of 41,000 Megawatt (Mw) and wants to add another 14,000 Mw by March 2017.

The company has already pulled down its original investment target of Rs 2 lakh crore for the current Plan period by around a fourth. Another power sector giant, equipment manufacturer Bharat Heavy Electricals Ltd (BHEL), is already revising downwards its investment target of Rs 1 lakh crore for the period.

The outlook for the current year, too, does not seem much promising. The government may have allowed fuel cost pass through to free investments stuck in projects but are consumers willing to pay higher costs? India Ratings, the Fitch Group-owned ratings agency, identifies offtake risk of high cost power as a major challenge this year.

 

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