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Reliance Power Underweight; RPOL.BO, RPWR IN
Fuel constraints impact profits, an improvement in availability is in the price, Maintain UW.
• 3Q results impacted by weak plant load factor and lower other
income: Rosa (600MW), RPWR’s lone operating project, reported a low
PLF of 53%, as expected, due to severe fuel constraints. The
management attributed lower than expected other income to low cash
yield. On the whole, reported PAT of Rs1.4B was lower than JPM est.
Rs1.7B (consensus Rs1.9B), despite deferred tax credit of Rs0.5B.
Under-recovery of fixed cost impacted Rosa numbers. At 53%, Rosa’s
PLF staged QoQ improvement from 40% in 2Q. We assume a 75%
sustainable PLF FY12 onwards. Our FY11 earnings estimate is revised
down 27% to factor in under-recovery of plant and corporate overheads.
• PLF low on account of shortage in linkage coal supply. According to
management, they are now blending spot purchase imported coal,
washery rejects as well as e-auction coal (total 40%). The subsequent
increase in tariff for this cost plus project needs to be approved by the
SEB on a regular basis. Management tried to allay plant availability
concerns by ensuring maintenance of 60 days worth of coal stock by
April 2011. In addition they stated that previous evacuation issues have
been sorted, and transmission line is now available: they expect PLF to
pick up in 4Q. Given the lack of confidence of linkage coal supply
RPWR might consider selling 100% of output from Rosa II (600MW)
on a cost plus basis vs. 50% merchant as planned.
• While management maintained guidance for completion timelines of
its under construction and pipeline projects we build in a 3-8 month
delay in estimates. According to RPWR they are confident of receiving
gas allocation for Samalkot (CoD Noc-11) and commence production at
captive mines by mid 2012 for Sasan (CoD Dec-12).
• An improvement in funding and execution climate, any progress on
the Chitrangi project (potentially, Rs50/share of SOP value but ignored
due to funding concerns) would make us more positive. The stock has
underperformed its peers and market quite sharply, and we believe this
will continue in the near term. Maintain UW.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Reliance Power Underweight; RPOL.BO, RPWR IN
Fuel constraints impact profits, an improvement in availability is in the price, Maintain UW.
• 3Q results impacted by weak plant load factor and lower other
income: Rosa (600MW), RPWR’s lone operating project, reported a low
PLF of 53%, as expected, due to severe fuel constraints. The
management attributed lower than expected other income to low cash
yield. On the whole, reported PAT of Rs1.4B was lower than JPM est.
Rs1.7B (consensus Rs1.9B), despite deferred tax credit of Rs0.5B.
Under-recovery of fixed cost impacted Rosa numbers. At 53%, Rosa’s
PLF staged QoQ improvement from 40% in 2Q. We assume a 75%
sustainable PLF FY12 onwards. Our FY11 earnings estimate is revised
down 27% to factor in under-recovery of plant and corporate overheads.
• PLF low on account of shortage in linkage coal supply. According to
management, they are now blending spot purchase imported coal,
washery rejects as well as e-auction coal (total 40%). The subsequent
increase in tariff for this cost plus project needs to be approved by the
SEB on a regular basis. Management tried to allay plant availability
concerns by ensuring maintenance of 60 days worth of coal stock by
April 2011. In addition they stated that previous evacuation issues have
been sorted, and transmission line is now available: they expect PLF to
pick up in 4Q. Given the lack of confidence of linkage coal supply
RPWR might consider selling 100% of output from Rosa II (600MW)
on a cost plus basis vs. 50% merchant as planned.
its under construction and pipeline projects we build in a 3-8 month
delay in estimates. According to RPWR they are confident of receiving
gas allocation for Samalkot (CoD Noc-11) and commence production at
captive mines by mid 2012 for Sasan (CoD Dec-12).
• An improvement in funding and execution climate, any progress on
the Chitrangi project (potentially, Rs50/share of SOP value but ignored
due to funding concerns) would make us more positive. The stock has
underperformed its peers and market quite sharply, and we believe this
will continue in the near term. Maintain UW.
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