It’s kinda hard to tell how things will unfold considering this sector is politically intertwined. Ideally DISCOMS will try to choose the lowest possible rate. For last 2-3 years rates dropped dramatically on IEX due to excess capacity, hence the buying spree on IEX. In recent months rates have picked up on IEX as supply/demand gap is getting adjusted.
In a sense it is possible to buy peak power through IEX if the rates are cheaper than buying through PPA.
Disclose : Not invested
Management has stated in the concall that higher prices in the past couple of months is seasonal (happens every year) and prices should cool down now. They had also mentioned that prices above Rs 4.5 would prompt discoms to switch to PPAs. So I would keenly watch this number. At least for this month prices have been below this number but I guess these are low demand months.
I mean to say is YoY month-wise price increase is significant compared to last 2 years. For me at least the current valuations are on higher side for any notable gains.
What effect would electricity storage systems connected to the grid have on IEX? Would volumes traded go down? Or would it remain unaffected?
I think the volume would go up. Currently the output is curtailed incase of excessive supply. Lets say for renewables, the energy can be stored and supplied at peak times.
Although economical storage systems are few years away, I dont think for medium term there is any impact.
Fairly decent quarter with 10% revenue and 18% PAT growth (some contribution through other income). With proposed buyback, there should be ~1% gain to EPS to existing shareholders.
Disc: Took a small position recently
@ravisrikant have you researched on the growth in RECs and how they will impact the IEX business in log term?
Not really. But broadly it depends on the renewable energy generation in the country for which the generator gets RECs. These RECs are then bought by SEBs to fulfill their renewable quota.
Anyone done an analysis as to why the volume traded in DAM contracts has been consistently declining YoY basis since last November. Is it likely that this could be structural issue for the short term spot market? While I understand the reasons that the management provides in the monthly power updates, hasn’t one or the reason gone on for a bit of time? It is peak summer and the average monthly volumes for May as well as June have hovered around 130-140 MUs - about 20-30% lower than last year. The company is at almost peak EBITDA margins and any degrowth in volumes could result in operating deleverage being played. Just wanted to know how forum members interested in IEX read this. Many thanks
The discoms have resorted to bilateral contracts. Why purchase through IEX when you can directly buy from suppliers.
IEX provides settlement guarantee and nowadays even prices for spot power aren’t high.
Bilateral contracts provides better realisation for suppliers and comparatively longer terms (weeks-6months).For discoms it provides stable supply at known fixed rate. IEX DAM is more like a top-up for day ahead short supply or selling excess for suppliers.
The main buyer last year was Gujarat discom due to issue related to tata and Adani umpp. Those have been largely resolved.
Regarding BSE’s foray in Power Exchange Market.
India’s power demand is expected to grow with the government’s focus of providing “24x7” clean and affordable power for all. Of around 1,200 billion units (bu) of electricity generated in India, the short-term market accounts for around 130-150bu. This trade volume has grown by around 10% annually and is valued at around ₹ 22,124 Crore.
This short-term power market is serviced by power exchanges, which function on the lines of commodity exchanges and provides a platform for buyers, sellers and traders of electricity to enter into spot contracts that are for the same day, next day, and on a weekly basis. It also provides a payment security mechanism to buyers and sellers. India, currently has two operating power exchanges—Power Exchange of India (PXIL) and India Energy Exchange (IEX).
There is a need to deepen existing exchanges through more evolved products, clarity on cross border trading along with institutional mechanisms to deal with forward contracts of varying durations.
In this regard, Pranurja Solutions Limited (Consortium of BSE Investments Limited, along with PTC India Limited and ICICI Bank Limited), filed a petition with the power market regulator, CERC (Central Electricity Regulatory Commission) on September 7, 2018 for grant of license for setting up a new power exchange. The final approval of CERC is awaited. Our proposed Power exchange would offer the market participants a world class power trading platform.
Source: BSE Annual Report 2018-19 (Page 78)
Thanks! Do you know how hard is exisiting particiapants to switch over to any other exchange from IEX?
AFAICU, existing participants can list on both exchanges. The current market is very much under-penetrated so both exchanges have the chance to gain new participants. So, for a participant, listing on both exchanges means better visibility towards other listed participants.
Disc. I know very little about energy exchanges. And this conclusion is based on the inference drawn from stock exchanges. I can very well be incorrect. Feel free to correct me.
As per CERC Rule 13(5) If Any Exchange has less than 20% market share for 2 consecutive year, it has to merge with other exchange. But for this rule to apply there has to be at least 3 exchanges.
Notes from annual report
Business performance
Key Business growth drivers
Questions to explore (Mostly thinking out loud):
In spite of several regulatory uncertainties, Power exchanges (IEX mainly) seems to be doing great.
