JPMorgan:: GVK Power & Infrastructure- Hydropower project falls victim to environmental protests

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GVK Power & Infrastructure
Neutral; GVKP.BO, GVKP IN
Hydropower project falls victim to environmental protests


• The Financial Express has reported that GVK’s under-construction
330MW Alaknanda hydropower project at Uttarakhand has
received a notice from the environment ministry. The order says that
ministry is reviewing compliance to the environmental clearance issued
to the project, amongst other things. It has disallowed further
construction work other than safety and electricity works up to 200 mw
on the project site.
• The order follows protest led by senior leader of BJP (a political party),
Ms Uma Bharati. The project, as per protests, would lead to
submergence of an important Hindu temple. Ministry officials will
inspect the site and submit their report to Mr Jairam Ramesh, Minister,
on June 21st before a final order is passed.
• Alaknanda was at an advanced stage of construction with estimated
COD of Mar-12. From a recent investor presentation, we gather that
major work on the dam, powerhouse, intake structure, switchyard, power
channel, desilting basin and headrace tunnel have been completed. We
estimate capex of Rs20B has already been incurred on the project
including equity of Rs4B, vs approved capex of Rs26B. The project
accounts for Rs1.1 in our SOP (3% of value).
• Unlike other hydroprojects that were scrapped mid-way due to
environmental / religious protests (Eg: NTPC’s 600MW Loharinag
Pala), we believe Alaknanda is at a much advanced stage and we
would be surprised if the project is abandoned at this stage. The
project might however get delayed and might see some cost overrun
if additional capex has to be incurred towards meeting
environmental cost if any.