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Lanco -----------------------------------------------------------------------------Maintain OUTPERFORM
Notes from the AIC: well funded to reach 9.3 GW, no merchant exposure from FY15
● Mr.. J. Suresh Kumar, CFO, represented Lanco Infratech at the
Credit Suisse Asian Investor Conference at Hong Kong last week.
● The company guided to reach 4.7 GW capacity by FY12 from its
current capacity of 3.3 GW. Our execution estimates are
conservative and expect Lanco to reach this capacity by 2Q13.
● Lanco expects merchant tariffs to start witnessing downward
pressure beyond FY14, mainly led by the completion of elections
and commissioning of large merchant capacities. It therefore
plans to cut its entire merchant exposure from FY15.
● Lanco expects its Griffin coal block to start producing 15 mmtpa
by FY15 and 20 mmtpa by FY20. Of this, 6 mmtpa is planned to
be consumed within Australia and the rest expected to be mainly
used by its power projects at a landed coal cost of A$80/tonne.
● Lanco expects its gearing to start falling from FY12 led by the
commissioning of its projects and expects no need for an equity
issuance to reach 9.3 GW capacity.
● The company would provide details on its recently won Mahatamil
bid once it receives the project LoI. Maintain OUTPERFORM.
Lanco to reach 4.7 GW capacity by FY12
Lanco has recently announced the synchronisation of its 0.6 GW
Anpara-I project, taking its operational capacity to 3.3 GW; making it
the largest private sector IPP currently. Of this, the commercial
operations of its 0.6 GW Anpara-I project is expected by 1Q12 and 0.6
GW Udupi-II project is likely during 3Q12 (on likely completion of its
transmission infrastructure).
Besides, the company expects to commission the 0.6 GW Anpara-II
and 0.07 GW Budhil projects during 2Q12 and the 0.7 GW Kondapalli-
III project in phases during 3Q/4Q12, taking its total operating capacity
to 4.7 GW by FY12. However, our execution estimates are
conservative and we expect Lanco to achieve this capacity by 2Q13.
Negotiations on Udupi-II & Amarkantak-II projects continue
Lanco has already synchronised the 0.6 GW Udupi-II project. But, the
implementation of its transmission infrastructure has been delayed by
the state utility. The project is lying idle until this infrastructure is
implemented, however, as per the contract, it should entitle Lanco to
earn deemed generation charges in the meanwhile. Lanco is
negotiating with the Karnataka SEB to recover these dues. Separately,
Lanco plans to start booking tariff for its 0.6 GW Udupi-I project on
actual basis from 4Q11 versus on a provisional basis during 3Q11.
On the other hand, Lanco continues to pursue matters with the
Haryana government to re-negotiate its tariff based on the CERC’s
regulated business model, for its 0.3 GW Amarkantak-II project.
Lanco would cut its entire merchant exposure from FY15
Lanco believes that the merchant tariffs would continue to remain
robust until FY14 led by low merchant capacities, continuing power
deficits and expected elections. However, it expects merchant tariffs
beyond FY14 to start witnessing downward pressure mainly led by the
implementation of large merchant capacities. Lanco therefore plans to
cut its entire merchant power exposure from FY15.
Griffin to produce 15 mmtpa by FY15, 20 mmtpa by FY20
Lanco expects to ramp-up coal production at its Griffin coal mine in
Australia from the current 4.5 mmtpa to 15 mmtpa by FY15 and
further to 20 mmtpa by FY20. To achieve this target, Lanco expects to
incur a capex of A$800 mn towards purchasing the mining equipment
and implementing the port & railway infrastructure over the next four
years. This capex is over and above the A$730 mn acquisition cost of
the mine, of which A$480 mn has been paid and the remaining A$250
mn needs to be paid in two instalments over four years.
Of this production, Lanco is required to sell about 6 mmtpa within
Australia, while the rest can be exported. Lanco plans to use most of
this exported coal for its power projects in India. Lanco expects the
landed cost of such coal at A$80/tonne. We have conservatively
factored in the capex of A$950 mn and expect Lanco to ramp-up to 15
mmtpa coal production by CY17.
Lanco expects no need for equity issuance to reach 9.3 GW
capacity
Lanco believes its gearing is comfortable and it expects no need for
equity issuance to reach 9.3 GW capacity (from the current 3.3 GW).
Lanco expects its gearing to reduce materially from FY12 onwards on
the commissioning of its new projects. However, the company plans to
enlist its power business separately after 12-18 months and use the
funds from such a listing towards further ramping up its power
generation capacity to 15GW (its stated target).
Details on the Mahatamil coal block to be disclosed later
Lanco has recently emerged as the lowest bidder to develop over 3
GW power project and the Mahatamil coal block (allocated jointly to
the Maharashtra & Tamilnadu governments). However, Lanco is yet to
receive the letter of intent (LoI) for the project and guided to divulge
details only once the LoI is received.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Lanco -----------------------------------------------------------------------------Maintain OUTPERFORM
Notes from the AIC: well funded to reach 9.3 GW, no merchant exposure from FY15
● Mr.. J. Suresh Kumar, CFO, represented Lanco Infratech at the
Credit Suisse Asian Investor Conference at Hong Kong last week.
● The company guided to reach 4.7 GW capacity by FY12 from its
current capacity of 3.3 GW. Our execution estimates are
conservative and expect Lanco to reach this capacity by 2Q13.
● Lanco expects merchant tariffs to start witnessing downward
pressure beyond FY14, mainly led by the completion of elections
and commissioning of large merchant capacities. It therefore
plans to cut its entire merchant exposure from FY15.
● Lanco expects its Griffin coal block to start producing 15 mmtpa
by FY15 and 20 mmtpa by FY20. Of this, 6 mmtpa is planned to
be consumed within Australia and the rest expected to be mainly
used by its power projects at a landed coal cost of A$80/tonne.
● Lanco expects its gearing to start falling from FY12 led by the
commissioning of its projects and expects no need for an equity
issuance to reach 9.3 GW capacity.
● The company would provide details on its recently won Mahatamil
bid once it receives the project LoI. Maintain OUTPERFORM.
Lanco to reach 4.7 GW capacity by FY12
Lanco has recently announced the synchronisation of its 0.6 GW
Anpara-I project, taking its operational capacity to 3.3 GW; making it
the largest private sector IPP currently. Of this, the commercial
operations of its 0.6 GW Anpara-I project is expected by 1Q12 and 0.6
GW Udupi-II project is likely during 3Q12 (on likely completion of its
transmission infrastructure).
Besides, the company expects to commission the 0.6 GW Anpara-II
and 0.07 GW Budhil projects during 2Q12 and the 0.7 GW Kondapalli-
III project in phases during 3Q/4Q12, taking its total operating capacity
to 4.7 GW by FY12. However, our execution estimates are
conservative and we expect Lanco to achieve this capacity by 2Q13.
Negotiations on Udupi-II & Amarkantak-II projects continue
Lanco has already synchronised the 0.6 GW Udupi-II project. But, the
implementation of its transmission infrastructure has been delayed by
the state utility. The project is lying idle until this infrastructure is
implemented, however, as per the contract, it should entitle Lanco to
earn deemed generation charges in the meanwhile. Lanco is
negotiating with the Karnataka SEB to recover these dues. Separately,
Lanco plans to start booking tariff for its 0.6 GW Udupi-I project on
actual basis from 4Q11 versus on a provisional basis during 3Q11.
On the other hand, Lanco continues to pursue matters with the
Haryana government to re-negotiate its tariff based on the CERC’s
regulated business model, for its 0.3 GW Amarkantak-II project.
Lanco would cut its entire merchant exposure from FY15
Lanco believes that the merchant tariffs would continue to remain
robust until FY14 led by low merchant capacities, continuing power
deficits and expected elections. However, it expects merchant tariffs
beyond FY14 to start witnessing downward pressure mainly led by the
implementation of large merchant capacities. Lanco therefore plans to
cut its entire merchant power exposure from FY15.
Griffin to produce 15 mmtpa by FY15, 20 mmtpa by FY20
Lanco expects to ramp-up coal production at its Griffin coal mine in
Australia from the current 4.5 mmtpa to 15 mmtpa by FY15 and
further to 20 mmtpa by FY20. To achieve this target, Lanco expects to
incur a capex of A$800 mn towards purchasing the mining equipment
and implementing the port & railway infrastructure over the next four
years. This capex is over and above the A$730 mn acquisition cost of
the mine, of which A$480 mn has been paid and the remaining A$250
mn needs to be paid in two instalments over four years.
Of this production, Lanco is required to sell about 6 mmtpa within
Australia, while the rest can be exported. Lanco plans to use most of
this exported coal for its power projects in India. Lanco expects the
landed cost of such coal at A$80/tonne. We have conservatively
factored in the capex of A$950 mn and expect Lanco to ramp-up to 15
mmtpa coal production by CY17.
Lanco expects no need for equity issuance to reach 9.3 GW
capacity
Lanco believes its gearing is comfortable and it expects no need for
equity issuance to reach 9.3 GW capacity (from the current 3.3 GW).
Lanco expects its gearing to reduce materially from FY12 onwards on
the commissioning of its new projects. However, the company plans to
enlist its power business separately after 12-18 months and use the
funds from such a listing towards further ramping up its power
generation capacity to 15GW (its stated target).
Details on the Mahatamil coal block to be disclosed later
Lanco has recently emerged as the lowest bidder to develop over 3
GW power project and the Mahatamil coal block (allocated jointly to
the Maharashtra & Tamilnadu governments). However, Lanco is yet to
receive the letter of intent (LoI) for the project and guided to divulge
details only once the LoI is received.
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