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Key takeaways
CESC has a current operational portfolio of 1,225 MW all of which caters to its Kolkata
distribution business. CESC plans to add another 2,520 MW by end-FY2015E which
includes 600 MW at Dhariwal (likely commissioning in FY2013E), 600 MW Haldia (likely
commissioning by FY2014E) and 1,320 MW at Orissa (likely commissioning by FY2015E).
Status of the power projects
Dhariwal (660 MW). Construction is in progress and management has indicated
likely commissioning by FY2013E. Dhariwal has already tied up 220 MW at a
levelized tariff of Rs3.3/kwh and plans to tie up another 220 MW. Depending on the
status of merchant tariffs, CESC will sell the balance 220 MW on a merchant basis.
Haldia (660 MW). BTG supplier has been shortlisted and construction work is likely
to commence by March 2011E. The management has indicated commissioning by
FY2014E. Haldia will sell 450 MW to CESC’s Kolkata distribution arm while balance
will be free for merchant sale.
Orissa (1,320 MW). Project has achieved key milestone and has applied for coal
linkage. The project has been recommended by CEA to Ministry of Coal for linkage
and secured 90 points—significantly higher than competing projects. Management
has indicated that construction could start by end-FY2012E with likely
commissioning by FY2016E.
Total capex requirement for these three projects will be Rs130 bn—of which equity
funding would be Rs31 bn. CESC has already infused Rs5 bn of equity and internal
accruals will likely fund another Rs16 bn. For the balance Rs10 bn of equity funding, the
company will likely look for private equity investment.
ICML (a group company of RPG Enterprises) has acquired 10% stake in Resource
Generation Ltd (Australia) for a consideration of AU$10.5 mn. The company has access to
proven reserves of 600 mn tons (South African coal) and mining operations are expected
to start by FY2013E. CESC was not directly involved in the transaction and has just
entered into a supply agreement with ICML. CESC has secured a supply of 1 mn tons for
the first three years followed by 2 mtpa for next 20 years.
CESC continues to make corporate level losses in its retail business though the retail
business has moved into positive store level EBITDA in 2HFY11. However, it will take
another 2.5 years for CESC to break into corporate level profitability. CESC’s store level
EBITDA was Rs21/sq. ft in 2QFY11 while total loss was Rs117 mn in 2QFY11.
Management has indicated that to move into corporate level profitability, CESC needs to
achieve scale and add on to its current store area of 0.9 mn sq. ft. CESC plans to add 0.3
mn sq. ft in FY2012E capex which will be funded by the parent entity. However, longterm
plans are to achieve operational efficiencies through calling up of business, to be
funded through private equity placement.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key takeaways
CESC has a current operational portfolio of 1,225 MW all of which caters to its Kolkata
distribution business. CESC plans to add another 2,520 MW by end-FY2015E which
includes 600 MW at Dhariwal (likely commissioning in FY2013E), 600 MW Haldia (likely
commissioning by FY2014E) and 1,320 MW at Orissa (likely commissioning by FY2015E).
Status of the power projects
Dhariwal (660 MW). Construction is in progress and management has indicated
likely commissioning by FY2013E. Dhariwal has already tied up 220 MW at a
levelized tariff of Rs3.3/kwh and plans to tie up another 220 MW. Depending on the
status of merchant tariffs, CESC will sell the balance 220 MW on a merchant basis.
Haldia (660 MW). BTG supplier has been shortlisted and construction work is likely
to commence by March 2011E. The management has indicated commissioning by
FY2014E. Haldia will sell 450 MW to CESC’s Kolkata distribution arm while balance
will be free for merchant sale.
Orissa (1,320 MW). Project has achieved key milestone and has applied for coal
linkage. The project has been recommended by CEA to Ministry of Coal for linkage
and secured 90 points—significantly higher than competing projects. Management
has indicated that construction could start by end-FY2012E with likely
commissioning by FY2016E.
Total capex requirement for these three projects will be Rs130 bn—of which equity
funding would be Rs31 bn. CESC has already infused Rs5 bn of equity and internal
accruals will likely fund another Rs16 bn. For the balance Rs10 bn of equity funding, the
company will likely look for private equity investment.
ICML (a group company of RPG Enterprises) has acquired 10% stake in Resource
Generation Ltd (Australia) for a consideration of AU$10.5 mn. The company has access to
proven reserves of 600 mn tons (South African coal) and mining operations are expected
to start by FY2013E. CESC was not directly involved in the transaction and has just
entered into a supply agreement with ICML. CESC has secured a supply of 1 mn tons for
the first three years followed by 2 mtpa for next 20 years.
CESC continues to make corporate level losses in its retail business though the retail
business has moved into positive store level EBITDA in 2HFY11. However, it will take
another 2.5 years for CESC to break into corporate level profitability. CESC’s store level
EBITDA was Rs21/sq. ft in 2QFY11 while total loss was Rs117 mn in 2QFY11.
Management has indicated that to move into corporate level profitability, CESC needs to
achieve scale and add on to its current store area of 0.9 mn sq. ft. CESC plans to add 0.3
mn sq. ft in FY2012E capex which will be funded by the parent entity. However, longterm
plans are to achieve operational efficiencies through calling up of business, to be
funded through private equity placement.
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