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Adani Power
Overweight; ADAN.BO, ADANI IN
Operational track record remains strong; merchant price disappoints
• Adani Power reported PAT of Rs1.1B vs. JPM est. of Rs1.6B. Key
points of difference include: 1) Rs155M of custom duties @ 16% i.e.,
Rs0.1/kwh which was not allowed as a pass-through in tariff and will
continue to impact earnings unless Adani can get a stay order on the
same. 2) Rs300M of additional deferred taxes on account of higher
depreciation; management expects the tax rate to be higher than the
MAT rate in FY12 as well. 3) Lower merchant price realization of
Rs3.9/unit vs. JPM est. of Rs4.5/unit, while volumes were also below
our estimate.
• Merchant sales mix in favour of bilaterals. Of total, 10% of units
sold at merchant rates, ~85% were sold via bilateral contracts while the
remaining 15% were sold on the exchange, depressing the tariff
compared to our estimate. During the quarter, exchange prices
averaged Rs2.3/unit (source: IEX), vs. ~Rs4/unit for bilateral trades in
October and November as per CERC data. There were negligible sales
in the UI market.
• Operations and execution best amongst IPPs. Adani’s 1.32GW of
operating capacity attained a PLF of 85% in 3Q, well above that of
Lanco and JSW Energy, which have both reported results. Barring the
lack of grid availability, deemed PLF would have been ~91-92%.
Pland availability averaged 95%, signaling consistent fuel supply as
well. Also the CoD for the 1st 660MW unit is expected to be achieved
this month (JPM est. Apr '11) and the second unit by Aug '11 (JPM
est.Sept '11).
• Coal availability reasonably secure. LoAs signed for domestic
linkages have not yet been converted into FSAs and management
seems not too confident in receiving CIL coal anytime soon. That said,
according to management, the 6mtpa of current production capacity at
the Bunyu mines can be ramped up to 9mtpa within a year. We model
9mtpa of coal consumption in FY12, of which 3mtpa is domestic,
supporting 2.5GW of operating capacity.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Adani Power
Overweight; ADAN.BO, ADANI IN
Operational track record remains strong; merchant price disappoints
• Adani Power reported PAT of Rs1.1B vs. JPM est. of Rs1.6B. Key
points of difference include: 1) Rs155M of custom duties @ 16% i.e.,
Rs0.1/kwh which was not allowed as a pass-through in tariff and will
continue to impact earnings unless Adani can get a stay order on the
same. 2) Rs300M of additional deferred taxes on account of higher
depreciation; management expects the tax rate to be higher than the
MAT rate in FY12 as well. 3) Lower merchant price realization of
Rs3.9/unit vs. JPM est. of Rs4.5/unit, while volumes were also below
our estimate.
• Merchant sales mix in favour of bilaterals. Of total, 10% of units
sold at merchant rates, ~85% were sold via bilateral contracts while the
remaining 15% were sold on the exchange, depressing the tariff
compared to our estimate. During the quarter, exchange prices
averaged Rs2.3/unit (source: IEX), vs. ~Rs4/unit for bilateral trades in
October and November as per CERC data. There were negligible sales
in the UI market.
• Operations and execution best amongst IPPs. Adani’s 1.32GW of
operating capacity attained a PLF of 85% in 3Q, well above that of
Lanco and JSW Energy, which have both reported results. Barring the
lack of grid availability, deemed PLF would have been ~91-92%.
Pland availability averaged 95%, signaling consistent fuel supply as
well. Also the CoD for the 1st 660MW unit is expected to be achieved
this month (JPM est. Apr '11) and the second unit by Aug '11 (JPM
est.Sept '11).
• Coal availability reasonably secure. LoAs signed for domestic
linkages have not yet been converted into FSAs and management
seems not too confident in receiving CIL coal anytime soon. That said,
according to management, the 6mtpa of current production capacity at
the Bunyu mines can be ramped up to 9mtpa within a year. We model
9mtpa of coal consumption in FY12, of which 3mtpa is domestic,
supporting 2.5GW of operating capacity.
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