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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » Energy related stocks and foreigners

Energy related stocks and foreigners

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1Energy related stocks and foreigners  Empty Energy related stocks and foreigners Fri Jan 17, 2014 8:05 am

celtic tiger


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
With current global situation energy related stocks should do better(that's what I thought) but when you look at yesterday's reports it shows that foreigners were on the selling side. Why is that ? Do they smell something that we can't ??

Leon


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
I think energy sector is very sensitive to many factors. Hydro power mainly to rain. When there's enough rain those should do well. Because it is the cheapest. Thermal power depend on crude oil prices. Crude oil price depends on many more factors. In sri Lankan context government decisions tent to change so rapidly. The recent change was not to extend some power purchasing agreement from private sector.
So I think the nature of vulnerability of this sector may keep foreigners away. Any way Chinwi is the ideal person to comment on this.



Last edited by Leon on Fri Jan 17, 2014 8:50 am; edited 1 time in total (Reason for editing : spelling)

Chinwi

Chinwi
Associate Director - Equity Analytics
Associate Director - Equity Analytics
At the moment, some energy sector stocks are highly attractive to institutional and big investors who wanted to grab controlling interest or have  long term considerable holding.

Retailers are going behind other sectors and stocks pushed by others .

The predictions of a possible el-nino for this year may affect foreign investors.  This could be a reason for selling. I am not sure.

During last few months of 2013 they predicted high temperature and el nino conditions for 2014. If el nino is fully activated , 2014 will be a dry year with lot of bush fires in some countries.

We did not get Maha rains from October 2013 and rainfed paddy in NCProvince are getting destroyed. Fortunately, yesterday we got good rains and this may help to save our paddy and increase contribution to GDP 2014. Somehow, our hydro-power stations are in the other part of the Island.

BTW, last week, on 9th of this month, USA 's Climate prediction Center  announced ENSO-neutral is expected to continue into the Northern Hemisphere summer 2014. That means el-nino is not activated as expected .
Scientists say recent hot weather and Bush fires in Australia are Not due to el nino conditions .

As per the latest studies of IRI of Columbia Uni. probability for an el-nino is only 10-30% till May 2014. From August it goes up to 40% - 46%

Hence , I hope 2014 will be a moderate year for our hydropower production and the shares will become more attractive with earnings.

I am holding for few more months. Tariffs will  go up in long run.

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
Chinwi, I know you have faith in HPFL but looking at earnings over past few quarters ( when VPEL and VLL did well) , I see HPFL has not show great colours. Their revenue/eps has not increased much from March 2011 when it was a good one ( it is about the same)

But yes it is trading below NAV . Also need to revisit their expansin plan to see whether it can surpass VPEL earnings which is quite healthy.

Chinwi

Chinwi
Associate Director - Equity Analytics
Associate Director - Equity Analytics
@slstock wrote:Chinwi, I know you have faith in HPFL   but looking at earnings over past few quarters ( when VPEL and VLL did well) , I see HPFL  has not show great colours. Their revenue/eps  has not increased much from March 2011 when it was a good one  ( it is about the same)  

But yes it is trading below NAV . Also need to revisit their expansin plan to see whether it can surpass VPEL earnings which is quite healthy.



Completion of their new plant is getting delayed and not contributing to revenue as expected earlier.  My selection was mainly due to their expansion plan and price correction from 15 ( 2 x NAV) to 5 ( below NAV).

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
Lookin at NAV, yes, HPFL is a good choice.

Have any of you considered the hidden factors in Energy for coming years?
CEB is encouraging individuals to go for Solar solutions. Since CEB has their own Solar project which can connect to grid, either individual homes can produce more and wave off their Electricity bills (conditions apply) or continue to pay the difference. In this case, if this is prospective, would the private power producers be at a disadvantage in years to come?

Or if a Electricity price hike comes, will individuals move to Solar as an alternative?

On the other hand, to produce more, increase production will be entertained and these companies can benefit with more production?
But what if after all these power plants produce energy CEB doesnt want it, like due to the popularity of Solar?

Fresher


Moderator
Moderator
@smallville wrote:Lookin at NAV, yes, HPFL is a good choice.

Have any of you considered the hidden factors in Energy for coming years?
CEB is encouraging individuals to go for Solar solutions. Since CEB has their own Solar project which can connect to grid, either individual homes can produce more and wave off their Electricity bills (conditions apply) or continue to pay the difference. In this case, if this is prospective, would the private power producers be at a disadvantage in years to come?

Or if a Electricity price hike comes, will individuals move to Solar as an alternative?

On the other hand, to produce more, increase production will be entertained and these companies can benefit with more production?
But what if after all these power plants produce energy CEB doesnt want it, like due to the popularity of Solar?

I do not have numbers but this is what I think.

With the population growth, there needs to be a steady increase in supply. Further, there are quite a few parts of the country that are yet to be provided with electricity i believe.

From what I researched few months back, it is not quite attractive for an individual consuming less than 180 units to go for solar power. Prices may come down further and make it attractive in future. Recently we saw a certain bank providing specific loans to install solar systems. In addition anyone building a new house can install solar and fund it from the housing loan itself.

This maybe a concern for the private producers but Hydro power will be the least affected. IMHO, there is no threat in the near future as far as solar is concerned.

Chinwi - I once looked at some material regarding different tariffs of CEB for purchasing power. Some of the companies do not specify this. Any idea how we can get some info regarding this?

Chinwi

Chinwi
Associate Director - Equity Analytics
Associate Director - Equity Analytics
@Fresher wrote:

Chinwi - I once looked at some material regarding different tariffs of CEB for purchasing power. Some of the companies do not specify this. Any idea how we can get some info regarding this?

Got this link. I also haven't seen real agreements.

http://www.ceb.lk/download/db/ncre_tariff.pdf


also this:
http://www.lankabusinessonline.com/news/sri-lanka-hikes-renewable-energy-tariffs-by-over-20-pct/879219989

Telling about the flat tariff increase of 28% for the plants built in 2013 and beyond .



Last edited by Chinwi on Sat Jan 18, 2014 8:11 am; edited 1 time in total

Fresher


Moderator
Moderator
@Chinwi wrote:
@Fresher wrote:

Chinwi - I once looked at some material regarding different tariffs of CEB for purchasing power. Some of the companies do not specify this. Any idea how we can get some info regarding this?

Got this link. I also haven't seen real agreements.

http://www.ceb.lk/download/db/ncre_tariff.pdf

Thanks Chinwi. This is the one I checked as well. Seems the companies will have different tariff applied to their various plants and I'm not able to get that info from anywhere. Let's keep checking as it might be useful.

Chinwi

Chinwi
Associate Director - Equity Analytics
Associate Director - Equity Analytics
@Fresher wrote:

From what I researched few months back, it is not quite attractive for an individual consuming less than 180 units to go for solar power. Prices may come down further and make it attractive in future. Recently we saw a certain bank providing specific loans to install solar systems. In addition anyone building a new house can install solar and fund it from the housing loan itself.


This was the painful reality of netmetering. I was advocating about this for many years.
When the technology was new the prices was extremely high.
Vendors prepare cost - benefit  charts and sell their products.
They prove your investment of around 1 - 1.5 million will be covered withing given years  if you consume over 200 Units.  
Somehow, if you consider the depreciation after 3-4 years and much lower prices of new inverters and panels you will realize your loss.
I think now the situation has changed to a better position. The current prices are somewhat OK to invest. China is controlling the production of panels to stop price drop.
http://asia.nikkei.com/Business/Trends/China-hands-death-sentence-to-75-of-solar-cell-makers

Even now, local method without netmetering, a 12V 40 Ah battery, 40-60 W panel, charge controller and few LED bulbs can be assembled by spending about 20-25,000/-.  But it gives you only 12 V supply.

seek


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
I reduced my Hydro power shares significantly and diversified the stake on COCR, SHL and TAFL. So far, it has been good decision with considerable returns from all three counters.

VLL is my best pick from the sector but seems one director doesn't want the share price to go up since he is still in the collection mood.

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