Electric India_ 2025 Outlook — Thermal in 2023, the Grid in 2024, what’s the story for this year_

Industry and Company Overview * Industry: Indian power sector, focusing on electricity demand, supply, and infrastructure. * Key Companies: NTPC Ltd., Adani Green Energy Ltd., ReNew Power, Power Finance Corp Ltd., Power Grid Corp. of India Ltd., IEX, and Adani Green Energy Ltd. Key Themes and Observations * Power Demand and Supply: * Demand: Expected to grow at 0.9x real GDP in FY26, with rooftop solar expected to erode net demand growth by 15-20%. * Supply: Shortages expected to continue in CY25, with potential for easing in the second half due to increased thermal capacity. * Battery Storage: Expected to play a significant role, with 3 GW of battery tenders in 2024 and significant potential for growth in CY25. * Renewables: Expected to see a slowdown in tendering due to transmission charges and import barriers. * Transmission: Grid capex plans have peaked, with limited room for further government estimates to increase. * DISCOMs: Key metrics have worsened, but there is a belief in directional improvement due to central government push. * Solar PV: Brighter outlook for solar cells, with potential for higher profits due to strong government stance and challenges in importing equipment from China. * Valuations: All preferred names are below or in-line with global median. * Investment Implications: * Outperform: NTPC, ReNew Power, Power Finance Corp Ltd., Power Grid Corp. of India Ltd. * Underperform: IEX, Adani Green Energy Ltd. Detailed Analysis * Power Demand: * Expected to grow at 0.9x real GDP in FY26, with rooftop solar expected to erode net demand growth by 15-20%. * Demand growth expected to slow down to 0.8x real GDP in FY25 due to cooler weather expectations, high base, and impact of rooftop solar. * Long-term view of 1x real GDP growth for India's power demand. * Power Supply: * Shortages expected to continue in CY25, with potential for easing in the second half due to increased thermal capacity. * Limited dispatchable supply expected to meet incremental non-solar power demand. * Significant potential for growth in battery storage and renewables. * Battery Storage: * 3 GW of battery tenders in 2024, with significant potential for growth in CY25. * Battery prices expected to continue to decline, making storage more affordable. * Potential for impact on new pumped storage, wind generation, and thermal plants. * Renewables: * Expected to see a slowdown in tendering due to transmission charges and import barriers. * Transmission charges to apply to renewable plants commissioned after June 2025. * Potential for higher costs for DISCOMs, leading to lower interest in signing PPAs and for new tenders. * Transmission: * Grid capex plans have peaked, with limited room for further government estimates to increase. * NEP-II on transmission has Rs 9 trillion plan considering ~460 GW of generation capacity addition. * Potential for increased tendering activity in the short term. * DISCOMs: * Key metrics have worsened, with rising AT&C losses and limited tariff hikes. * Belief in directional improvement due to central government push. * Solar PV: * Brighter outlook for solar cells, with potential for higher profits due to strong government stance and challenges in importing equipment from China. * Entry of Reliance could be a key negative for solar modules. * Industry checks suggest a very tight market with 'domestic cells' selling at 16-17 cents/w. Conclusion The Indian power sector is expected to face challenges in the short term, with demand growth expected to slow down and supply shortages continuing. However, the long-term outlook remains positive, with significant potential for growth in battery storage, renewables, and transmission infrastructure. The report provides a detailed analysis of the key themes and investment implications for various companies in the sector.