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News: CERC has finalised the tariff regulations for FY24-FY29. The regulator has largely maintained the RoE for existing thermal, hydro and transmission assets while incentivising new hydro assets with 17% RoE and reduced the RoE for new transmission assets to 15%. There are no material changes in the final order versus the draft order, except a few: 1) Thermal – incentive of Rs 0.55/unit for off peak (vs. 50p/unit for off – peak earlier). 2) Transmission – minor changes in O&M expenses. 3) Hydro – relaxed normative availability norms for certain plants. The new regulations are beneficial for thermal gencos owing to higher renovation and maintenance cost, higher incentive for off-peak supply, and hydro gencos for higher RoE on new assets.
Views: We believe the same has already been discounted in the stock prices of public utilities as there is no material change in the draft vs. final regulations. We continue to like utility like NTPC which is on the right path of better operational portfolio mix between thermal and green portfolio.
Impact: Positive