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COMPANY QUICK COMMENT
In a press release, NTPC stated that it commissioned Unit-1 (660MW) of Sipat today (June 28) - in-line with guidance
given by management when we visited the site earlier this month. We expect Unit-1 to achieve CoD in 4-6 weeks,
Unit-2 in the next 6 months and Unit-3 by 1QFY13 if not in 4QFY12 itself. In our view, commissioning of the supercritical unit is a significant milestone; moreover it signifies that technical problems relating to the TG unit (vendor
being Power Machines of Russia) have been successfully resolved. At 1.9x FY13F P/B, valuations appear reasonable;
maintain BUY.
Commissioning of 660MW Unit-1 at Sipat is a critical milestone
Event
In a press release, NTPC stated that it commissioned Unit-1 (660MW) of its (3x660MW) Sipat-I power project today (June 28, 2011).
The unit was synchronized on February 18, 2011; with the commissioning of this unit, total capacity at Sipat facility (Phase I and
Phase II) now stands at 1660MW.
Analysis & Implications
We note that the commissioning timeline of Unit-1 (660MW) of Sipat-I is in-line with guidance given by management when we visited
the site earlier this month (see Takeaways from our visit to Sipat facility and Dipka, Gevra coal mines,6
th
June, 2011). We expect
Unit-1 to achieve CoD (begin commercial operations) in 4-6 weeks.
In our view, commissioning of NTPC’s first super-critical unit is a significant milestone; moreover it signifies that technical problems
relating to the TG unit (vendor being Power Machines of Russia) have been successfully resolved.
As per management, indicative startup timeline for the remaining two supercritical units at Sipat is August (Unit-2) and 4QFY12 (Unit-
3). In our view, Unit-2 should achieve CoD within the next six months and CoD of Unit-3 should happen by 1QFY13 if not in 4QFY12
itself.
Valuation Methodology and Investment Risks: We use a residual income model to value the company. Key assumptions of our model
are 1) Cost of equity - 12%; 2) Terminal RoE - 20%; and 3) terminal growth rate - 2%. Risks: 1) Project execution delays; 2) lower coal
supplies under already signed FSAs/LoAs; 3) reinvestment risk; and 4) adverse regulatory changes.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
COMPANY QUICK COMMENT
In a press release, NTPC stated that it commissioned Unit-1 (660MW) of Sipat today (June 28) - in-line with guidance
given by management when we visited the site earlier this month. We expect Unit-1 to achieve CoD in 4-6 weeks,
Unit-2 in the next 6 months and Unit-3 by 1QFY13 if not in 4QFY12 itself. In our view, commissioning of the supercritical unit is a significant milestone; moreover it signifies that technical problems relating to the TG unit (vendor
being Power Machines of Russia) have been successfully resolved. At 1.9x FY13F P/B, valuations appear reasonable;
maintain BUY.
Commissioning of 660MW Unit-1 at Sipat is a critical milestone
Event
In a press release, NTPC stated that it commissioned Unit-1 (660MW) of its (3x660MW) Sipat-I power project today (June 28, 2011).
The unit was synchronized on February 18, 2011; with the commissioning of this unit, total capacity at Sipat facility (Phase I and
Phase II) now stands at 1660MW.
Analysis & Implications
We note that the commissioning timeline of Unit-1 (660MW) of Sipat-I is in-line with guidance given by management when we visited
the site earlier this month (see Takeaways from our visit to Sipat facility and Dipka, Gevra coal mines,6
th
June, 2011). We expect
Unit-1 to achieve CoD (begin commercial operations) in 4-6 weeks.
In our view, commissioning of NTPC’s first super-critical unit is a significant milestone; moreover it signifies that technical problems
relating to the TG unit (vendor being Power Machines of Russia) have been successfully resolved.
As per management, indicative startup timeline for the remaining two supercritical units at Sipat is August (Unit-2) and 4QFY12 (Unit-
3). In our view, Unit-2 should achieve CoD within the next six months and CoD of Unit-3 should happen by 1QFY13 if not in 4QFY12
itself.
Valuation Methodology and Investment Risks: We use a residual income model to value the company. Key assumptions of our model
are 1) Cost of equity - 12%; 2) Terminal RoE - 20%; and 3) terminal growth rate - 2%. Risks: 1) Project execution delays; 2) lower coal
supplies under already signed FSAs/LoAs; 3) reinvestment risk; and 4) adverse regulatory changes.
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