Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Event
Lanco Infratech (Lanco) recently announced plans to position itself as an integrated player in the
solar power space with a presence in manufacturing, EPC and energy generation. It plans on
developing its solar EPC and manufacturing capabilities for both captive and third-party projects.
Details
Lanco has signed 25-year PPAs for 41MW using Solar Photo Voltaic Technology (Solar PV) at a
project cost of Rs6.6bn. Of these, projects totaling 35MW have been signed with the Gujarat
government at a tariff of Rs15/kwh for the first 12 years and Rs5/kwh for the next 13 years. It has
commissioned its first 5MW unit in Gujarat and expects to commission the rest in 2011.
Lanco is also setting up a 100MW solar plant in Rajasthan based on solar thermal technology
(project cost, Rs18bn), with a bid tariff of Rs10.5/kwh. It has secured land, power evacuation and
water allotment for the project and targets commissioning the plant in May 2013.
Over the next four years Lanco targets developing solar EPC capabilities of 500 MW/annum and
project development capability of 400 MW/annum. It also plans to set up integrated
manufacturing capacity of 250 MW. The company plans to utilize its EPC and manufacturing
capabilities for undertaking third-party contracts as well, and estimates the annual EPC market
for solar power at 1000MW, which translates into an opportunity of ~Rs120bn.
The company is setting up an integrated manufacturing SEZ in Chattisgarh, which would
eventually have capacity to manufacture 250MW solar power modules. In the first phase, Lanco
will set up capacity to manufacture 1250MT of polysilicon, 80MW of wafer and 50MW of
modules at a total capex of Rs13.7bn. It has already tied up financing with a 70% debt
component. It plans to commission the module capacity by Q1FY12 and the polysilicon and
wafer manufacturing capacities by Q3FY13. Lanco has deals with two US-based technology
providers for the necessary technology. The manufacturing facility will enjoy various fiscal
incentives, including 20% capital subsidy, import-duty exemption for equipment and raw
material, and exemption from MAT. Part of the capacity would be used for internal
consumption and the rest for third-party projects.
In FY12, Lanco plans to undertake 131MW of own solar EPC projects and 180MW third-party solar EPC
projects, with a revenue potential of Rs25bn-Rs30bn and at EBITDA margins of 8-10%.
The total equity requirement is likely to be ~Rs8.5bn over the next two years. Lanco expects to utilize cash
generated from solar EPC and solar PV projects to meet a substantial part of this requirement.
Rationale for foray into solar power and key drivers
Strong global demand: Global demand has grown exponentially from ~300MW/annum in 2003 to
~17,000MW/annum in 2010 and estimated to grow further to 30,000MW/annum by 2014.
Strong potential in the Indian market: Solar photovoltaic (PV) PPAs worth 1150MW have been signed for
construction over the next 12 months. Solar thermal PPAs worth 500MW have been signed for construction
over the next 28 months.
Rationale for setting up manufacturing capabilities - government norms under JNNSM (Jawaharlal Nehru
National Solar Mission) mandate a phase-wise increase in domestic manufacturing content, eventually covering
the complete value chain.
Key drivers would be the renewable purchase obligations (RPO) set by CERC and various state regulators. The
Solar Power Purchase obligation for states start with 0.25% of power purchased in phase 1 (FY11-13) and up to
3% by 2022.
Our view
Lanco currently has an operating portfolio of 2074MW power plant and is developing power projects totaling
~8500MW to be commissioned over the next 3-4 years. It has a consolidated net worth of ~Rs45bn and, we estimate,
cash profits of ~Rs26bn each in FY12 and FY13. As for Lanco’s near term equity requirement of ~Rs8.5bn towards
solar power, part of it is likely to be funded by EPC margins on these projects. Given Lanco’s balance sheet size and
future cash flow streams, we do not envisage any constraints in funding the residual equity portion. We believe
there is insufficient clarity on the economics and return profile of the solar power business at this point of time.
Further, risks also arise due to technological changes as well as Lanco’s lack of experience in the sector. As a result,
we remain cautious on Lanco’s strategy of entering the entire value chain of the solar power segment and have not
valued it in our SOTP valuation. We maintain Outperformer rating on the stock with a target price of Rs66.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Event
Lanco Infratech (Lanco) recently announced plans to position itself as an integrated player in the
solar power space with a presence in manufacturing, EPC and energy generation. It plans on
developing its solar EPC and manufacturing capabilities for both captive and third-party projects.
Details
Lanco has signed 25-year PPAs for 41MW using Solar Photo Voltaic Technology (Solar PV) at a
project cost of Rs6.6bn. Of these, projects totaling 35MW have been signed with the Gujarat
government at a tariff of Rs15/kwh for the first 12 years and Rs5/kwh for the next 13 years. It has
commissioned its first 5MW unit in Gujarat and expects to commission the rest in 2011.
Lanco is also setting up a 100MW solar plant in Rajasthan based on solar thermal technology
(project cost, Rs18bn), with a bid tariff of Rs10.5/kwh. It has secured land, power evacuation and
water allotment for the project and targets commissioning the plant in May 2013.
Over the next four years Lanco targets developing solar EPC capabilities of 500 MW/annum and
project development capability of 400 MW/annum. It also plans to set up integrated
manufacturing capacity of 250 MW. The company plans to utilize its EPC and manufacturing
capabilities for undertaking third-party contracts as well, and estimates the annual EPC market
for solar power at 1000MW, which translates into an opportunity of ~Rs120bn.
The company is setting up an integrated manufacturing SEZ in Chattisgarh, which would
eventually have capacity to manufacture 250MW solar power modules. In the first phase, Lanco
will set up capacity to manufacture 1250MT of polysilicon, 80MW of wafer and 50MW of
modules at a total capex of Rs13.7bn. It has already tied up financing with a 70% debt
component. It plans to commission the module capacity by Q1FY12 and the polysilicon and
wafer manufacturing capacities by Q3FY13. Lanco has deals with two US-based technology
providers for the necessary technology. The manufacturing facility will enjoy various fiscal
incentives, including 20% capital subsidy, import-duty exemption for equipment and raw
material, and exemption from MAT. Part of the capacity would be used for internal
consumption and the rest for third-party projects.
In FY12, Lanco plans to undertake 131MW of own solar EPC projects and 180MW third-party solar EPC
projects, with a revenue potential of Rs25bn-Rs30bn and at EBITDA margins of 8-10%.
The total equity requirement is likely to be ~Rs8.5bn over the next two years. Lanco expects to utilize cash
generated from solar EPC and solar PV projects to meet a substantial part of this requirement.
Rationale for foray into solar power and key drivers
Strong global demand: Global demand has grown exponentially from ~300MW/annum in 2003 to
~17,000MW/annum in 2010 and estimated to grow further to 30,000MW/annum by 2014.
Strong potential in the Indian market: Solar photovoltaic (PV) PPAs worth 1150MW have been signed for
construction over the next 12 months. Solar thermal PPAs worth 500MW have been signed for construction
over the next 28 months.
Rationale for setting up manufacturing capabilities - government norms under JNNSM (Jawaharlal Nehru
National Solar Mission) mandate a phase-wise increase in domestic manufacturing content, eventually covering
the complete value chain.
Key drivers would be the renewable purchase obligations (RPO) set by CERC and various state regulators. The
Solar Power Purchase obligation for states start with 0.25% of power purchased in phase 1 (FY11-13) and up to
3% by 2022.
Our view
Lanco currently has an operating portfolio of 2074MW power plant and is developing power projects totaling
~8500MW to be commissioned over the next 3-4 years. It has a consolidated net worth of ~Rs45bn and, we estimate,
cash profits of ~Rs26bn each in FY12 and FY13. As for Lanco’s near term equity requirement of ~Rs8.5bn towards
solar power, part of it is likely to be funded by EPC margins on these projects. Given Lanco’s balance sheet size and
future cash flow streams, we do not envisage any constraints in funding the residual equity portion. We believe
there is insufficient clarity on the economics and return profile of the solar power business at this point of time.
Further, risks also arise due to technological changes as well as Lanco’s lack of experience in the sector. As a result,
we remain cautious on Lanco’s strategy of entering the entire value chain of the solar power segment and have not
valued it in our SOTP valuation. We maintain Outperformer rating on the stock with a target price of Rs66.
No comments:
Post a Comment