Investors in Power Stocks like Reliance Power and Adani Power Blasted Twice Over !

The Sad Reality is that Investors in Power  Generation Stocks,particularly Reliance Power and Adani Power have just been Blasted twice over

~ on one hand,a macro risk beyond their control,  they are seeing their Electricity Bills zoom without actual increase in number of Units consumed as Power Prices hit the roof 


~on the other hand, a micro risk they could have avoided,they are seeing their Investments in these Power Stocks going “Poof” as they have eroded dangerously in value

What Happened to India’s Power Industry that was the darling just a few years ago ! and saw the likes of Reliance Power (RPL) and Adani Power (APL) shamelessly exploit Investors with hugely  out priced and obscene Big Ticket IPOs !?~ RPL asked us for Rs 450 per share and APL for Rs 100 a share ~ and we suckers gave it to them ! while Promoters actually subscribed to nearly all their controlling stake at par Value of just Rs 10 ! ~ Today we cry for being suckered seeing RPL sink to Rs 88 and APL to Rs 42 ! 

The Power Sector Woes lie in the huge spiralling  cost of Imported  Thermal Coal  from Indonesia.In October 2011  Indonesia actually ripped the Indian Power Industry apart by changing it’s Coal pricing Method and aligning prices to international levels and  significantly imposing Coal Exports Restrictions and Increasing Royalties on Coal Mining and Taxes on Coal Exports and in fact even announcing banning Exports by 2014

Thermal Coal Feed Power Plants are simply unviable now if Power Prices continue to be regulated heavily and full costs are not passed on to the Consumer~ However despite Regulation,Inevitably Electricity is going to cost More and More

In July and August 2009 I had blogged comprehensively on the Adani Power (APL) IPO at Rs 100 after thoroughly reviewing it’s Prospectus  ~ It had entered into 15 year Coal Supply Contract at even then a low US $ 36/t with its parent Adani Enterprise (AEL) ~ AEL in turn was to import the Coal from it’s Bunyi Mines in Indonesia ~ The Price of Coal has shot up nearly  three times from this level of the contracted US $ 36 to levels of US $ 100 ~ in 2010 APL was introduced into F & O and was Rs 125 then ~ Today it has sunk to a low of  Rs 42 (FV Rs 10)

Adani Power Struggles on Listing today…saves face by closing at Issue price of Rs 100

Thursday, August 20th, 2009 IPO of Adani Power at top end Rs 100….Aggressive Pricing makes it an Aggressive Investment

Saturday, July 25th, 2009


APL had stated Coal Supply from AEL as a Risk Factor in the Prospectus ~ it has played up as the major risk factor ~ in fact it’s become a survival factor for APL ~ I had commented in my above 2009 blogs and responses to them on this risk voicing a suspicion that the contracted US $ 36 was a low price even at the time for coal read more