Power stocks unlikely to benefit from N-deal

From the stock market perspective, listed power companies are less likely to benefit from it. Said Dipen Shah, vice president-PCG Research at Kotak Securities: “no major impact is seen on shares of power companies, in the immediate term. Right now nuclear power contributes less than 10 per cent of total power produced. It will take a few years for nuclear power companies to come up with additional facilities.”

NTPC, having an installed capacity of over 20,000 MW, plans to start with 2000 MW nuclear plant once it gets the go-ahead from the government. Others private players like Tata Power and Reliance Power have shown interest in engaging in nuclear power plants once they get necessary approval from the government.

India has a total installed power generation capacity of 1,44,564.97 MW. Out of this, 64.6 per cent capacity is achieved by thermal fuel (coal, gas and oil), hydro contributes 10.5 per cent while nuclear energy generates 2.9 per cent. (Source: Ministry of Power)

The government has recommended a roadmap for meeting the energy requirement for the next 25 years. It has approved four sites of 700 MWe pressurised heavy water reactor and four Light Water Reactor of 1000 MWe. From a capacity of 3,900 MWe in March 2006, the government has set an ambitious goal of 20,000 MWe for the year 2020. (Source: Nuclear Power Corporation of India)

Construction and power equipment companies who may get contracts for construction of nuclear plants are likely to see major rise in their order book. However, rising interest costs and economic slowdown will be a hurdle these companies will have to face.

“Power equipment companies like L&T and Areva and some construction companies which have prior experience in building parts of nuclear power plants will be impacted beneficially,” Shah added.

He added that the power generated from nuclear plants will not outstrip demand. Hence, it will not impact earnings of non-nuclear fuel companies.

“We could not identify clean beneficiary of the 123 Agreement--owing to meaningless contribution and insignificant exposure of listed companies to nuclear energy. However, we view that few companies like Areva T&D, Alstom Projects, Rolta India, KSB Pumps, HCC, Simplex Infrastructure, McNally Bharat, etc have products in the nuclear energy segment but cannot ascertain the benefit derived from the same,” says Emkay Global Financial Services.

BY CA RAGHAV SHARDA