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Power
Capacity addition of coverage universe picks up pace
During the quarter, NTPC added ~1000 MW (standalone) of capacity
while NHPC and Neyveli Lignite reported no capacity addition and
Lanco Infratech added 1200 MW of capacity. For our coverage
universe, we expect capacity addition of ~ 9000 MW in FY12.
The government has revised the Eleventh Five Year target of
capacity addition from 62,000 MW to 58,000 MW. We believe, with
the best efforts, ~48,000 MW is expected to be achieved till the end
of the Eleventh Plan. For FY11, capacity addition was 12,060 MW
against the target of 16,790 MW (achievement of 70%). During
Q4FY11, there was capacity addition of ~ 2800 MW.
Merchant power rates increase sequentially but decline YoY
Merchant power rates have firmed up QoQ. We expect companies
with merchant power exposure (Lanco Infratech, Tata Power), to
report a realisation in the range of ~| 4.2-4.60/kwhr. On IEX,
merchant power rates in the southern region were as high as |
8/kwhr due to grid congestion. We expect merchant power rates to
stabilise at ~| 4.5 -5/kwhr in Q1FY12 on account of state elections.
Higher international coal prices, sluggish domestic coal production
in FY12 –key headwind…
During Q4FY11, international spot thermal coal prices (6700 kcal)
have increased by 19% QoQ ($127/ tonne). Coal India’s domestic
production for FY11 was 440 MT while that for FY12E was 447 MT.
Incrementally, the additional domestic coal production will be able
to support 1500 MW of capacity.
…coupled with back down by SEBs
In FY11, NTPC lost ~ 13 BUs on account of under drawal by SEBs.
While the worsening financial position of SEBs is well known, it
poses a bigger risk to IPPs who will commission power plants on
imported coal. From our coverage universe, Lanco Infra (30% of
imported coal) is most vulnerable.
PAT, EBITDA to decline YoY, QoQ
From our coverage universe, we expect EBITDA margins to decline
~ 700 bps YoY due to higher fuel costs and lower generation of
recently commissioned projects. We expect PAT margins to decline
by 300 bps YoY on account of higher depreciation and interest cost.
Company specific view
Company Remarks
NTPC NTPC has sold ~57.86 BU in Q4FY11, reporting an increase of 12% YoY. We expect
realisation to be ~ | 2.50 per unit. During the quarter, the company commissioned
1000 MW taking the overall capacity addition for FY11 to 2490 MW. The company
will be grossing tariff on pre-tax RoE of 23% instead of MAT (18%)
NHPC * The company has sold ~2650 MUs in Q4FY11E. Our assumption for per unit
realisation in Q4FY11E is | 2.3/kwhr (earlier tariffs). Results on a YoY basis are not
comparable (Q4FY10 included higher realisation based on tariff petitions). On a QoQ
basis, we expect topline and bottomline de-growth by 16% and 19%, respectively
Neyveli Lignite The company is expected to report topline growth of 12% and bottomline de-growth
of 13% YoY (lower tax in Q4FY10), respectively. The company has sold ~5151 MUs,
up 12% YoY on 125 MW capacity addition in Q4FY11E. We have built in a realisation
rate of | 2.40/unit
JP Hydro The company has sold 217 MUs in Q4FY11E. We expect average realisation of | 2.4
per unit. The company has a current generation capacity of 700 MW of hydropower.
We expect a loss of ~| 48 crore on account of higher interest (securitisation of
receivables of 700 MW)
PTC India We expect PTC to report trading volumes of 6041 MUs for Q4FY11E growth. The
trading margins are also expected to go up YoY in Q4FY11E to 5.5 paisa. We have
built in average realisation of | 3.8 per unit in Q4FY11E
Lanco Infratech
**
We expect revenues and EBITDA to be ~ | 2135 crore (decline of 9% YoY) and ~|
547 crore (decline of 19% YoY) on lower merchant realisation. We expect PAT to be
|108 crore (down 12% YoY) on account of initial losses due to commissioning of
1200 MW
Tata Power The company is expected to report topline growth of 3% and bottomline de-growth
of 49% YoY (higher other income in Q4FY10), respectively. The company has
commissioned 120 MW - IEL in Q4FY11E. We expect coal realisation at $80/tonne
in Bumi resources
* There is a possibility that the company may report higher revenues and PAT (higher realisation per unit) based on
tariff petition filed by the company. We have assumed realisations based on earlier norms
**One offs like higher inter segment elimination; other income may impact PAT growth
Source: Company, ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Power
Capacity addition of coverage universe picks up pace
During the quarter, NTPC added ~1000 MW (standalone) of capacity
while NHPC and Neyveli Lignite reported no capacity addition and
Lanco Infratech added 1200 MW of capacity. For our coverage
universe, we expect capacity addition of ~ 9000 MW in FY12.
The government has revised the Eleventh Five Year target of
capacity addition from 62,000 MW to 58,000 MW. We believe, with
the best efforts, ~48,000 MW is expected to be achieved till the end
of the Eleventh Plan. For FY11, capacity addition was 12,060 MW
against the target of 16,790 MW (achievement of 70%). During
Q4FY11, there was capacity addition of ~ 2800 MW.
Merchant power rates increase sequentially but decline YoY
Merchant power rates have firmed up QoQ. We expect companies
with merchant power exposure (Lanco Infratech, Tata Power), to
report a realisation in the range of ~| 4.2-4.60/kwhr. On IEX,
merchant power rates in the southern region were as high as |
8/kwhr due to grid congestion. We expect merchant power rates to
stabilise at ~| 4.5 -5/kwhr in Q1FY12 on account of state elections.
Higher international coal prices, sluggish domestic coal production
in FY12 –key headwind…
During Q4FY11, international spot thermal coal prices (6700 kcal)
have increased by 19% QoQ ($127/ tonne). Coal India’s domestic
production for FY11 was 440 MT while that for FY12E was 447 MT.
Incrementally, the additional domestic coal production will be able
to support 1500 MW of capacity.
…coupled with back down by SEBs
In FY11, NTPC lost ~ 13 BUs on account of under drawal by SEBs.
While the worsening financial position of SEBs is well known, it
poses a bigger risk to IPPs who will commission power plants on
imported coal. From our coverage universe, Lanco Infra (30% of
imported coal) is most vulnerable.
PAT, EBITDA to decline YoY, QoQ
From our coverage universe, we expect EBITDA margins to decline
~ 700 bps YoY due to higher fuel costs and lower generation of
recently commissioned projects. We expect PAT margins to decline
by 300 bps YoY on account of higher depreciation and interest cost.
Company specific view
Company Remarks
NTPC NTPC has sold ~57.86 BU in Q4FY11, reporting an increase of 12% YoY. We expect
realisation to be ~ | 2.50 per unit. During the quarter, the company commissioned
1000 MW taking the overall capacity addition for FY11 to 2490 MW. The company
will be grossing tariff on pre-tax RoE of 23% instead of MAT (18%)
NHPC * The company has sold ~2650 MUs in Q4FY11E. Our assumption for per unit
realisation in Q4FY11E is | 2.3/kwhr (earlier tariffs). Results on a YoY basis are not
comparable (Q4FY10 included higher realisation based on tariff petitions). On a QoQ
basis, we expect topline and bottomline de-growth by 16% and 19%, respectively
Neyveli Lignite The company is expected to report topline growth of 12% and bottomline de-growth
of 13% YoY (lower tax in Q4FY10), respectively. The company has sold ~5151 MUs,
up 12% YoY on 125 MW capacity addition in Q4FY11E. We have built in a realisation
rate of | 2.40/unit
JP Hydro The company has sold 217 MUs in Q4FY11E. We expect average realisation of | 2.4
per unit. The company has a current generation capacity of 700 MW of hydropower.
We expect a loss of ~| 48 crore on account of higher interest (securitisation of
receivables of 700 MW)
PTC India We expect PTC to report trading volumes of 6041 MUs for Q4FY11E growth. The
trading margins are also expected to go up YoY in Q4FY11E to 5.5 paisa. We have
built in average realisation of | 3.8 per unit in Q4FY11E
Lanco Infratech
**
We expect revenues and EBITDA to be ~ | 2135 crore (decline of 9% YoY) and ~|
547 crore (decline of 19% YoY) on lower merchant realisation. We expect PAT to be
|108 crore (down 12% YoY) on account of initial losses due to commissioning of
1200 MW
Tata Power The company is expected to report topline growth of 3% and bottomline de-growth
of 49% YoY (higher other income in Q4FY10), respectively. The company has
commissioned 120 MW - IEL in Q4FY11E. We expect coal realisation at $80/tonne
in Bumi resources
* There is a possibility that the company may report higher revenues and PAT (higher realisation per unit) based on
tariff petition filed by the company. We have assumed realisations based on earlier norms
**One offs like higher inter segment elimination; other income may impact PAT growth
Source: Company, ICICIdirect.com Research
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