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Chandrapur and Haldia projects both on track
Power project progress: The Chandrapur and Haldia I projects (600MW each) are both on schedule and expected to be
operational by FY14. The company has tied up 75% of Haldia to its own distribution business under the regulated model. It
has also tied up 200MW for Chandrapur at cINR3.3 per unit. Thus, in terms of fuel, funding and PPA the company is well
placed for both projects. Also, for its 1.32GW project at Orissa, the company has got all the approvals and only awaiting coal
linkage to go ahead with financial closure and equipment ordering, which it expects in FY12.
Funding: The company needs to contribute cINR26bn of equity over the next three years for the above 2.5GW of projects, of
which it looks to fund INR16bn though internal accruals, while raising equity of INR10bn at the power subsidiary level,
resulting in dilution of c20-25%, depending on the valuation. The company has appointed consultants to handle the matter.
Retail business: The losses in its retail business are reducing and the company expects to break even by end March 2013.
This is based on ramping up its trading area from 0.9mn sft currently to 2.4mn sft by FY13 end.
Valuation and risks
We use SOTP to value CESC – power business at INR408 (using DCF assuming WACC of 11%), retail business at INR29
negative (DCF, WACC of 13%) and investments and others at 1x book value (INR96) to arrive at a target price of INR475.
Key risks: Higher than expected losses in its retail business and delay in capacity addition of its power plants.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Chandrapur and Haldia projects both on track
Power project progress: The Chandrapur and Haldia I projects (600MW each) are both on schedule and expected to be
operational by FY14. The company has tied up 75% of Haldia to its own distribution business under the regulated model. It
has also tied up 200MW for Chandrapur at cINR3.3 per unit. Thus, in terms of fuel, funding and PPA the company is well
placed for both projects. Also, for its 1.32GW project at Orissa, the company has got all the approvals and only awaiting coal
linkage to go ahead with financial closure and equipment ordering, which it expects in FY12.
Funding: The company needs to contribute cINR26bn of equity over the next three years for the above 2.5GW of projects, of
which it looks to fund INR16bn though internal accruals, while raising equity of INR10bn at the power subsidiary level,
resulting in dilution of c20-25%, depending on the valuation. The company has appointed consultants to handle the matter.
Retail business: The losses in its retail business are reducing and the company expects to break even by end March 2013.
This is based on ramping up its trading area from 0.9mn sft currently to 2.4mn sft by FY13 end.
Valuation and risks
We use SOTP to value CESC – power business at INR408 (using DCF assuming WACC of 11%), retail business at INR29
negative (DCF, WACC of 13%) and investments and others at 1x book value (INR96) to arrive at a target price of INR475.
Key risks: Higher than expected losses in its retail business and delay in capacity addition of its power plants.
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