Power sector shares sizzle on hopes of reforms

 Suzlon Energy Ltd was recommended today at Rs.16.90, for a target of Rs.22. But the stock has the potential to become more than double from the current price.

Shares of 17 firms operating in the power sector rose by 0.87% to 6% at 12:09 IST on BSE on reports the cabinet may meet next week to take more reform steps such as improving the finances of power utilities.
Reliance Infrastructure (up 6%), Lanco Infratech (up 5.45%), JSW Energy (up 5.03%), GMR Infrastructure (up 4.66%), Bhel (up 4.29%), Reliance Power (up 3.96%), Adani Power (up 3.7%), Tata Power (up 3.29%), Crompton Greaves (up 3.26%), Torrent Power (up 2.55%), NHPC (up 2.47%), Suzlon Energy (up 2.36%), ABB (up 2.14%), Power Grid Corporation of India (up 2.14%), Siemens (up 1.85%), NTPC (up 1.74%) and Thermax (up 0.87%), edged higher.
The BSE Power index was up 2.79% at 1,960.28. It outperformed the Sensex, which was up 1.80% at 18,680.32.
The BSE Power index had underperformed the market over the past one month till 20 September 2012, falling 1.05% compared with the Sensex's 3.72% rise. The index had also underperformed the market in past one quarter, rising 2.52% as against Sensex's 8.60% rise.
A recent media report suggested that as part of the renewed push to big bang economic reforms, the Manmohan Singh government is likely to clear a proposal to restructure the debt of state electricity boards (SEBs) and power distribution companies (discoms) to revive the ailing sector.
According to Reserve Bank of India data, the power sector has a total outstanding debt of Rs 344980 crore, or 7.94% of the banking sector's non-food credit as on 27 July 2012.
Report suggested that the discoms do not have enough money to buy power as a result of which even power surplus states such as Himachal Pradesh are suffering as well. The government's plan proposes to restructure a part of the loans given to discoms. Half of these loans would be transferred to the respective state government in lieu of which discoms would issue bonds.
Under the arrangement, companies would reportedly have to service only the interest on reduced loans while state governments would service interest on the bonds. Banks and financial institutions are expected to reschedule the rest of the loans with a moratorium of up to three years on repayment of the principal amount, the report added.