Found this in another thread on VP. Sharing it here because it also talks about IEX.
Aquamarine-Fund_Manager-Letter-2022.pdf (123.9 KB)
Guy Spier Letter to Shareholder, good read.
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Wonder why Dalmia would want to sell off their 14+% stake if its such a good investment.
Do they plan to buy out the cement businesses of Adani? Cement > Exchange; or maybe for them since they become a leading player post that acquisition if it happens… but why would they sell before; wont it be prudent to sell post the confirmation that Adani is going to sell to them only
But then Dalmia has been selling since May 2021 at around 130 level
They had bought this stake in 2020 Sept at around adjusted price of around 63
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Guy spier has been wrong before,he has recommended care ratings but care ratings has not gone up much in the last 10 years.
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Analysis of Guy Spier is very simple as he’s holding Moody’s (rating agency) in USA and same strategy he applied in 2002-2003 buying Crisil but at that time he exited very early and after that Crisil went up like 50 baggers or more so on, same analogy is applied to CARE, but there may be some fundamental problems related to company needs to be checked.
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IEX Power Update: March 23
Key highlights:
- Overall electricity market share at 88%.
- All the segments have shown positive growth on Month on Month Basis.
Also attaching the quarterly and yearly numbers.
The good thing about this business is transparency which makes it very easy to track.
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Is the Marketshare going down from 95% to 88% currently?
Inverse relationship between unit price of energy and DAM volumes, but whenever prices are falling volumes are not increasing evenly since IEX is loosing marketshare…
eg. FY23 unit price increase 35%; IEX traded power fell to 51,151(MU) 23% lower vis FY22
But now when prices are falling March Unit price 5.25 lower by 23%, DAM volumes increased by only 2% to 4,745 MU
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143-MP-2022-others.pdf (224.9 KB)
CERC order : transaction fee 2 paise/KW/side were decided
Hangover was there coz some parties had files a case regarding that.
CERC order came in and said the Fee charges are good. So no hangover.
UBS disclosed this and everybody missed this one.
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The recent CERC order approving exchanges to charge fees up to 2 paise/kWh from either party to the transactions.
Read more at:
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Hi Members,
Is slashing of price ceiling an invitation for driving more participation in power exchanges and hence a positive for IEX and other exchanges, or is it negative overall from another perspective ?
Disc: Invested. Less than 5% of portfolio.
Negative in my view. Producers will try to sell bilaterally bypassing the exchange. Producers are likely to sell at prices determined by Demand-Supply and not what it costs to generate.
Disclosure : Invested
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@Subhadeep
Thank you for your prespective. Always helps to have a broader Thesis and Anti-Thesis points.
It would be interesting to see in the coming times, how government encourages these entities to deal via exchanges instead of otherwise.
Very good analysis
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Power update: April 23
Key comments:
-
Major reason for the decline in the price as compared to the last year was an improved supply-side scenario leading to increased liquidity, as well as cooler weather conditions. Sell-side liquidity improved on the Exchange due to Government initiatives to ensure adequate power
supply during this summer season, including gas-based thermal power that was made available on the exchange. -
Lesser power demand in many states as they witnessed unprecedented rainfalls.
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Unprecedented rainfalls could impact many more sectors in my opinion.
In Maharashtra, there is major set back to farmers not only in Non-Konkan areas but also in Konkan area. Alphonso mango crop is only 25% compared to any other normal year, which is massive impact. Disruptions due to weather, massive unseasonal rainfalls can impact power demand for more time this year.
Rising inflation due to this may have more impact on FMCG stocks for few more months.
I think, investors need to be on their guard about weather related issues more in next decade probably than last 2 decades.
Just general observations. Not only related to IEX.
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Carbon Credit Market - New window of opportunity for IEX?
As we all know the Indian Energy Exchange (IEX) in Dec 2022 announced it has established the International Carbon Exchange - a wholly owned subsidiary that will serve the nation’s emerging domestic voluntary carbon market as well as foreign carbon offset buyers.
I would say that Indian Carbon market as a whole is in its nascent stages.The Indian Government aims to give the domestic carbon market a specific form by June 2023. India still needs to discuss issues related to carbon equivalence and pricing, as well as recognition processes for these systems.
Power ministry in March 2023 issued a draft called as ‘Carbon Credit Trading Scheme’ with an aim to set up a framework for Indian carbon market and sought feedback from stakeholders (Power Exchanges (IEX/ PXIL ??).
The Indian parliament has passed the Energy Conservation (Amendment) Bill, 2022 and a notification for the same was issued in December 2022. One of the provisions of this amendment included empowering the central government to “specify carbon trading scheme”, in consultation with Bureau of Energy Efficiency (BEE). Now the ministry of power is in the process to finalise the Carbon Credit Trading Scheme (CCTS)
The CCTS provides that an ‘accredited carbon verifier’ means an agency accredited by the BEE to carry out validation or verification activities in respect of the CCTS.
The 'Carbon Credit Certificate’ (CCC) means the certificate issued to the registered entity by the central government, or any agency authorised by it, in the CCTS where each certificate issued shall represent reduction or removal of one tonne of CO2 equivalent (tCO2e), it stated.
The ‘CCTS’ means the scheme for reduction or removal of greenhouse gas (GHG) emissions notified by the central government, it stated.
The scheme provides for setting up of the Indian Carbon Market Governing Board (ICMGB). The governance of the Indian Carbon Market (ICM) and direct oversight of its administrative and regulatory functioning shall vest in the governing board, to be called as ICMGB. It will recommend procedures for institutionalising the Indian carbon market for the approval of the central government. The board will also recommend the central government the rules and regulations for the functions of ICM. It will recommend methodologies to be used under voluntary mechanism for the approval of the central government. It will also recommend guidelines regarding sale of carbon credit certificates to outside India to the central government (Scope of Potential outside India too??).
It will also approve projects under the voluntary mechanism and recommend the central government or its designated agency (like Power Exchanges IEX??) for issuance of carbon credit certificate (CCC).
It will approve the process/conditions for crediting period/renewal/ retirement of CCC and have oversight of the administrative and regulatory functions of Indian carbon market. It will constitute any committee or working group as required in connection with ICM.
The Bureau of Energy Efficiency shall be the administrator for the Indian carbon market and shall also work as the secretariat for the ICMGB. The Grid Controller of India Ltd shall be the registry for the Indian Carbon Market.
The Central Electricity Regulatory Commission (CERC) shall be the regulator for the trading activities under the Indian carbon market, same as in the power trading.
Now lets understand what is Carbon Border Adjustment Mechanism (CBAM) and why it is in news recently.
The European Unions EU’s CBAM puts an emissions tariff on imports of goods with a high risk of carbon leakage from countries which are not members of the EU Emissions Trading System (ETS). Note that the CBAM will commence in its transitional phase as of 1 October 2023.
The CBAM will initially apply to imports of certain goods and selected precursors whose production is carbon intensive and at most significant risk of carbon leakage: cement, iron and steel, aluminium, fertilisers, electricity and hydrogen
What does it mean for Indian companies?
India is urging the EU to validate its Carbon Credit Trading Scheme (CCTS) as its steel, iron and aluminium exports may face more inspections under the Carbon Border Adjustment Mechanism (CBAM). Remember Europe is the main destination of steel exports for Indian mills. Non-EU steel manufactures will have to report direct and indirect emissions under the EU tax structure that may impose a 20%-35% duty on select imports from January 1, 2026. The EU importers must acquire CBAM certificates that cover the carbon footprints associated with manufacturing imported steel products. India has put forward various options to combat CBAM and has initiated bilateral talks with the US and EU regarding the issue.
A carbon market creates an incentive for more sectors and individual corporations to transition to low-carbon fuels and operations. Companies that find it hard to decarbonise their operations for lack of capital can still meet their climate goals by buying carbon credits on the market. Micro, small and medium enterprises (MSMEs) are one example. There are several companies in India who are very willing to invest in emissions reductions for carbon trading, but they are not getting good prices on the international market, so it was decided from Indian Governement to develop an indigenous carbon market.
As and when these developments evolve, we have to watch out how much pie of it IEX would enjoy.
Sources
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Correct, an opportunity and a big opportunity,
Almost 500 million units of carbon credits are traded globally presently. By 2030, this is expected to be almost 1,500-
2,000 million carbon credit units – an increase of 3X/4X in trading volume (based on a study with McKinsey).
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