Reliance Power -- Largest growth portfolio in power:: Macquarie Research,

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Reliance Power
The Largest growth portfolio in power
Event
 Reliance Power has the largest project pipeline of the listed private power
developers (33,780MW) in India. Its project pipeline is boosted by three ultra
mega power projects (UMPPs) – Sasan, Tilaiya and Krishnapatnam – that
total around 11,920MW.
 RPWR is tightly held by its promoters – 80% of the total equity is held by the
promoter and promoter group, including 38% by Reliance Infrastructure and
22% by AAA Project Ventures Private Limited (AAPVPL). Retail investors
represent around two-thirds of the free float and institutional investors onethird.
Therefore, the stock is quite tightly held by low-turnover promoters and
retail investors.

Impact
 Largest project pipeline with a diversified portfolio: Reliance power has
the largest growth projects under various stages of construction totalling
33,780MW. The planned projects offer diversification in terms of fuel source,
geographical location and off take agreements.
 Another 6GW of growth: RPWR has noted in FY11 that it has land and
water in place for a further 5,940MW of power capacity at Sasan, Chitrangi
and Tilaiya, in addition to the 11,880MW of capacity.
 Two thirds of coal based portfolio based on captive coal: With 2.0bn
tonnes of captive coal reserve, the company’s coal based portfolio is highly
reliant on captive resource. Though, being a cheap fuel source, risks around
execution remain high entailing various clearances with several clearance
requirements from the government.
 Samalkot likely to get gas – 2400MW on ground by FY12 end: according
to the company, and noting that the CEA has recommended gas allocation for
the project, they anticipate formal allocation shortly.
Action and recommendation
 RPWR is exposed to execution risk in the Indian power sector, due to several
clearances required to start up a power project. Operational execution for coal
assets and Samalkot expansion remains crucial and would be closely
watched out for.


RPWR has a large captive coal resource
 RPWR sitting on ~2bn coal reserves: which was a creative and clever strategy, in our view,
during the first bid of a pit-head based UMPP. RPWR realised that the value for the project didn’t
sit in the power plant infrastructure and subsequent power contract, but in the coal reserves.


 But we await some execution before pricing in all the upside: captive coal production has
fallen well short of expectations due to the long-list of execution hurdles for developing coal in
India. For a company with no experience in coal mining, that needs to deliver around 35mtpa of
coal into low IRR projects before capitalising from excess coal, with a resource controlled by the
Government, in regions with environmental and political risk, the risk remains relatively high in our
view.


Reliance Power Aide Memoire
Questions for Management
1. Latest update on your upcoming and under development projects. Update us on the progress made so far in each of them
(various clearances, equipment orders etc).
2. Update on Samalkot Gas allocation and how is the project progressing?
3. How is the equipment sourcing for captive coal mines progressing? When would the equipment be in place and the
production from coal mines commence?
4. Update on the details around sharing of coal mining with NTPC for the captive coal blocks. What are the terms of the
contract? Can NTPC commence production prior to you?
5. How much linkage coal is Rosa plant getting? How much imported coal is delivered at site? What power tariff is UP going
to pay following the use of imported coal at the plant?
6. How much cash has been paid to Shanghai Electric to date for both gas and coal fired plant contracts?