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Surge in Power Demand May Bring Relief to Generating Units

News:

Power demand has crossed the 1.50 lakh Mw level for the first time because of increased farm demand and reduced generation from hydel power stations as the monsoon recedes, pushing electricity prices on the Indian Energy Exchange (IEX) to a record. 

Source: ET

SNP Insight:

The increase in demand for power in the country is a good sign for the struggling power plants. This may help them to start their stranded capacity which is not performing due to low demand. As the market clearing price touch to comfortable INR 3.64 /Kwh shows a positive sign for domestic coal based power plants to sell power in short term market. This may also increase the demand for domestic coal by increasing the off taking capacity of coal based power plants. This may help CIL to increase its production and may strengthen the 1 billion production target goal. Also this may bring back investor and financial institution confidence on the sector by reducing the risk of nonperforming assets (NPAs). This positive scenario may lead to get future financing for upcoming projects. But these conditions only prevail if the demand for power is not short live.

Source: SNP Infra Research