Power and utilities

Business model

Three layers in the electricity value chain:

1. Generation - companies that own power plants (thermal coal, hydro, nuclear, solar, wind). Revenue = generation × tariff. Tariffs are largely regulated for older plants; market-based for newer renewables and merchant capacity.

2. Transmission - companies that move bulk power on the grid (PowerGrid, state transmission companies). Cost-plus regulated. Stable, low-growth, dividend-yielding.

3. Distribution - supplying power to end consumers. Mostly state-owned (DISCOMs) with chronic financial weakness. A few private players in select cities.

Renewable energy (solar, wind, hybrid) is the fastest-growing sub-sector; capital-intensive, with long-tenor power purchase agreements (PPAs) locking in cash flows for 20-25 years.

Key metrics

For generation:

• Plant Load Factor (PLF) - % of capacity utilised. Coal PLFs of 60-75%; solar 18-22% (capacity factor).
• Realisation per unit (kWh) - tariff received
• Fuel cost (coal players) - pet coke or imported coal price
• PPA mix - fixed-tariff (long-term, predictable) vs merchant (market-linked, volatile)