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MOSL: UTILITIES-Silver lining for over-supplied power market-CEA identifies 72GW thermal capacity that could be phased out

​UTILITIES: Silver lining for over-supplied power market; CEA identifies 72GW thermal capacity that could be phased out

• CEA has preliminarily identified 72GW of thermal generation capacity that cannot meet the revised SOx norms and would therefore be closed. Some refinements in this list of plants are likely, as errors are removed and developers find innovative ways to meet the revised norms (partial/joint FGDs).
  
• Of the capacity identified, ~33GW are units over 25 years old. Excluding ~13GW of NTPC plants that are likely to get replaced, the remaining ~20GW plants could be permanently weeded out of the system.
  
• Environment norms are likely to provide a stronger basis for the Ministry of Power's plans to close older units (to improve system efficiency). Retiring older non-compliant plants could bring forth the balancing of India's electricity market by FY20-21, earlier than our current estimate of FY22-23.
  
• We like companies with healthy balance sheet and open capacities like CESC and JSW Energy. NTPC could benefit from higher specific capex on new plants. Realignment of supply centers would boost investment in transmission. We like Power Grid.