X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Power – The roads to reform… - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Sep 20, 2000

    Power – The roads to reform…

    Historically, the state has either owned or operated the electricity supply or heavily regulated almost every aspect of the industry in most countries. This led to a lack of competition and consequently to inefficient power generation, distribution and transmission.

    United Kingdom (UK) was the first major country to realise that the state simply could not handle power supply efficiently and hence, undertook a major restructuring to privatise the sector. From there on, power sector restructuring has not looked back, though every now and then it faces numerous hiccups along the way. In each country the power sector scenario is different and what type of restructuring it needs is also hotly debated. But on the whole most government’s in the world realise that for economic growth power had to be generated, transmitted and distributed more optimally.

    This led to the evolution of Independent power producer (IPP) - a single power plant largely developed, financed, built and operated by the private sector. Since IPPs were privately owned, they required financial guarantees from the not so healthy state utilities. The financial agreements of IPP have evolved over the years and have taken many forms, depending on the state of deregulation or privatisation in the country. In some countries such as the US the electricity regulations forced utilities to buy power from IPPs at the utility's avoided cost. In other parts of the world, such as in South East Asia, the BOT (build-own-transfer) privatisation model and its variations resulted in IPPs with negotiated or competitively bid tariffs. However, one of the most common IPP agreements is the long-term power purchase agreement (PPA) for either the IPPs capacity, or its energy output, or both.

    Once in place, long-term PPAs effectively insulated IPPs from competitive operating pressures. Not any more. Single-asset electricity generation is slowly evolving into a highly competitive, fragmented, commodity-based business. The dismantling of power business by states into four functions - generation (Genco), transmission (Transco), and distribution (Disco) companies and power services is further attracting competition. Thus, private power producers, even those with binding contracts, are increasingly finding themselves in competition with new upcoming producers.

    This may lead to renegotiated PPA’s resulting in lower energy tariffs or real time market rates (spot rates). Tariff reductions, however, may be problematic for many IPPs, constrained as they are by the terms of their financing agreements.

    But in all this the power business as a whole gains substantially. Not only are the power functions optimized but also the electricity bills for consumers come down. Is India listening?

     

     

    Equitymaster requests your view! Post a comment on "Power – The roads to reform… ". Click here!

      
     

    More Views on News

    NTPC: Higher Tax Provision Impacts Profits (Quarterly Results Update - Detailed)

    Mar 30, 2017

    NTPC declared results for the quarter ended December 2016. The company reported revenue growth of 10.9% while profits declined by 7.5% YoY.

    NTPC: Capacity Addition a Key to Earnings Going Ahead (Quarterly Results Update - Detailed)

    Nov 23, 2016

    NTPC declared results for the quarter ended September 2016. Here is our analysis of the results.

    Power Grid: Robust Performance Continues (Quarterly Results Update - Detailed)

    Nov 23, 2016

    Power Grid Corp (PGCIL) declared its results for the quarter ended September 2016. The company reported a revenue and profit growth of 28% YoY and 32% YoY respectively.

    Power Grid: Steady Start to the Year (Quarterly Results Update - Detailed)

    Sep 29, 2016

    Power Grid Corp (PGCIL) declared its results for the quarter ended June 2016. The company reported a revenue and profit growth of 31% YoY and 35% YoY respectively.

    NTPC: Good Start to the Year (Quarterly Results Update - Detailed)

    Sep 29, 2016

    NTPC declared results for the quarter ended June 2016. Here is our analysis of the results.

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    S&P BSE POWER


    Aug 18, 2017 (Close)

    COMPARE COMPANY

    MARKET STATS