Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
NHPC: Key takeaways
NHPC has an installed generation capacity of 5,295 MW (including 1,520 MW in a
subsidiary) and an additional 4,502 MW under construction.
NHPC plans to approximately double its installed generation capacity upon the
commissioning of the projects currently under construction. Management has indicated
that increasing cash flows from existing/ongoing projects, a strong balance sheet and
proven execution and operation capabilities are likely to enable the company to nearly
double its capacity from 5,295 MW to 9,797 MW.
NHPC gains little from the recent draft tariff regulations which incentivize generation of
power during peak hours for thermal stations and pumped storage type hydro stations.
Although the segregation of tariffs would imply higher tariffs during peak hours, it would
not impact the annual revenue of generating companies as the annual cost recoverable
along with return on equity remains unchanged.
On the issue of return on CWIP, management highlighted that the core contention
remains that allowing return on CWIP would (1) inflate the overall project cost for the
end-consumer, on which a recurring regulated return would be paid for the life of the
project, (2) may disincentive timely commissioning of projects, and (3) may have to be
allowed for thermal projects as well, thereby defeating the purpose of reducing the
disparity between the returns of thermal and hydel projects. Management indicated that
likely solutions to the same could come in the form of (1) not allowing an RoE for the
first three years of project implementation (most thermal projects take that much time to
be implemented), and (2) allowing returns on CWIP only for a ‘reasonable time’ beyond
the first three years.
The management indicated a low probability of introducing competitive bids for hydro
projects and phasing out the extant cost-plus tariff mechanism owing to high execution
risks in hydro power projects from geological surprises which makes estimation of project
cost and timelines difficult thus making it difficult for the developer to commit both, price
(due to cost overruns) and time (due to delays) for eventual sale of power.
On the issue of private sector competition in allotment of hydro project sites from the
state government, NHPC highlighted that they are overcoming the handicap of not being
able to pay ‘upfront premiums’ for project allocations by giving interest-bearing loans and
advances. Though management conceded, that being a public enterprise always limits the
options NHPC has when competing with the private sector.
Management also indicated that they have highlighted to the regulator, (1) truing up of
O&M expenses, (2) review of the normative availability factors, and (3) review of the cap
on secondary energy charges currently at Rs0.8/kwh
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
NHPC: Key takeaways
NHPC has an installed generation capacity of 5,295 MW (including 1,520 MW in a
subsidiary) and an additional 4,502 MW under construction.
NHPC plans to approximately double its installed generation capacity upon the
commissioning of the projects currently under construction. Management has indicated
that increasing cash flows from existing/ongoing projects, a strong balance sheet and
proven execution and operation capabilities are likely to enable the company to nearly
double its capacity from 5,295 MW to 9,797 MW.
NHPC gains little from the recent draft tariff regulations which incentivize generation of
power during peak hours for thermal stations and pumped storage type hydro stations.
Although the segregation of tariffs would imply higher tariffs during peak hours, it would
not impact the annual revenue of generating companies as the annual cost recoverable
along with return on equity remains unchanged.
On the issue of return on CWIP, management highlighted that the core contention
remains that allowing return on CWIP would (1) inflate the overall project cost for the
end-consumer, on which a recurring regulated return would be paid for the life of the
project, (2) may disincentive timely commissioning of projects, and (3) may have to be
allowed for thermal projects as well, thereby defeating the purpose of reducing the
disparity between the returns of thermal and hydel projects. Management indicated that
likely solutions to the same could come in the form of (1) not allowing an RoE for the
first three years of project implementation (most thermal projects take that much time to
be implemented), and (2) allowing returns on CWIP only for a ‘reasonable time’ beyond
the first three years.
The management indicated a low probability of introducing competitive bids for hydro
projects and phasing out the extant cost-plus tariff mechanism owing to high execution
risks in hydro power projects from geological surprises which makes estimation of project
cost and timelines difficult thus making it difficult for the developer to commit both, price
(due to cost overruns) and time (due to delays) for eventual sale of power.
On the issue of private sector competition in allotment of hydro project sites from the
state government, NHPC highlighted that they are overcoming the handicap of not being
able to pay ‘upfront premiums’ for project allocations by giving interest-bearing loans and
advances. Though management conceded, that being a public enterprise always limits the
options NHPC has when competing with the private sector.
Management also indicated that they have highlighted to the regulator, (1) truing up of
O&M expenses, (2) review of the normative availability factors, and (3) review of the cap
on secondary energy charges currently at Rs0.8/kwh
No comments:
Post a Comment