Tata Power set to gain from rising coal prices; JSW Energy, Torrent may lose: JM Financial

Tata Power set to gain from rising coal prices; JSW Energy, Torrent may lose: JM Financial

Tata Power is the only Indian utility company that is likely to benefit from rising costs of imported fuel, while JSW Energy and Torrent Power may be negatively affected, a brokerage said.

The conflict in Eastern Europe is pushing up prices of imported coal and natural gas, hurting the profitability of power utility companies. The biggest losers are companies that do not have the backing of long-term power purchase agreements (PPA) for the electricity they generate.

The average price of imported coal climbed to about $203 per tonne in March, according to the HBA Index, also known as the Indonesian Coal Index. Asia Spot LNG prices surged to $39/metric million British thermal unit (MMBtu). These prices are still lower than the October 2021 peak of $217/tonne and $48/MMBtu for coal and gas, respectively.

Brokerage firm JM Financial Institutional Securities has categorised power utilities into three buckets based on the impact of coal/gas prices on their profitability – those likely to have a positive impact, a negative impact and no impact.

Positive impact

Tata Power is the only utility company that is likely to gain from the rise in fuel prices, according to JM Financial’s report. The benefit comes from the company’s 30 percent stake