Adani Power:: Sep-q results: Capex on track, debt refinancing positive:; JPMorgan

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Adani Power Overweight
ADAN.BO, ADANI IN
Sep-q results: Capex on track, debt refinancing positive



• Merchant realization lower in Sep-q, still on track to meet FY11 est.
Adani Power reported PAT of Rs.1.26B (+10% QoQ), 12% below our
expectation of Rs1.43B and in-line with street expectations. At Rs4.9/kwh
(vs. Rs6.7/unit in Jun-q), merchant rate was lower than our est. of
Rs.5.5/unit in Sep-q. We maintain our FY11 est. at Rs5/unit and FY12
estimate at Rs.4/unit.
• 82% PLF in Sep-q, slightly better than expected. As per mgmt. the
3x330MW units have been operating at ~90% PLF in the month of
October. Management highlighted that lower grid demand during
monsoons on account of improved hydro generation resulted in lower PLF
and softer merchant prices during Sep-q.
• Debt refinancing to lower interest cost. Adani Power refinanced
Mundra-I&II (1320MW) debt. The ~Rs.36B INR loan @ 11.5% interest
was refinanced with ECB loans @ Libor+400bps. The weighted average
interest cost for the project has reduced to 7.81%. The company has raised
Rs49B of ECB loans, so far. A 200bps reduction in cost of debt for all
projects under construction (5.3GW ex MI&II) would result in an upside
of Rs6/share.
• Project Progress- capex largely on track. Mgmt. expects the 4th
330MW unit at Mundra to be commissioned Nov-10 end vs. guidance of
Oct-10 earlier (we delay our est. by 2 months) while maintaining that the
1st 660MW unit will achieve CoD by Jan-11 (we model a 3 month delay).
Amongst pipeline projects, the 1.32GW Kawai (CoD est: Nov-13) project
achieved financial closure. We rank Adani high on execution skills, minor
delays are part & parcel of mega project development. As of Jun-10 the
company had incurred 95%+ capex for Mundra-III (1320MW), 60% for
Mundra-IV (1980MW) and 27.3% for Tiroda-I (1980MW).
• We maintain OW and Sep-11 PT of Rs153. Our PT includes Rs127 for
under construction projects and Rs26 for pipeline projects. Key downside
risk includes lower merchant prices, higher coal costs and significant