Shares of power utilities may be available cheap, but be careful of what you are buying. According to brokerage house HSBC, a turnaround in the fortunes of the sector is still some way off.
An extract from the HSBC report on the power sector:
“Private sector-led record capacity addition of 33GW in FY11-12 has considerably reduced investor concerns about capacity. However a sharply reduced PLF and PAF (plant load and availability factor) for both public and private generators (lowest since FY07) is a matter of concern and we believe has greatly eroded margins and profitability. The operational weakness was most acute for the newest projects, while a drop in operating levels was sharper for private companies with less visibility on coal supply.”
What do you think? Are power shares a good bet at these levels?
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