Nomura’s first cut calculations suggest that CERC’s final tariff regulations entail a potential 3%-4% dent (on the lower side for power sector) to its earnings forecast for Power Grid Corporation post FY14, says Nomura in a research note
The Central Electricity Regulatory Commission (CERC) issued the final tariff regulations for the period FY15-19 – these regulations form the basis of Power Grid’s earnings (regulated returns) from its core transmission business over the next five years. CERC had issued the FY15-19 draft tariff regulations in December 2013; subsequently, representations from various stakeholders were invited and a public hearing on the draft norms was held in January 2014.
According to the research note by Nomura, the final tariff regulations are conducive for Power Grid Corporation of India’s earnings outlook. Purely on benchmark operating norms, our first cut calculations suggest that CERC’s final tariff regulations entail a potential 3%-4% dent to its earnings forecast for Power Grid post FY14. In spite of a potential dent in earnings forecast, this should be regarded as a relief because other players in the power sector are likely to be performing worse on the same aspect.
The Nomura research note maintains a ‘BUY’ rating for the Power Grid share in the stock market.
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