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PTC India
Robust Operationally…
Scaling up the trading business via leadership status
• PTC India is promoted by NTPC, PowerGrid, PFC and NHPC with
the primary objective of trading power, facilitating development of
power projects & power market and promoting a power trading
exchange
• PTC is the largest player in the short-term power trading market
and maintains market share in excess of 35%. The short-term
market constitutes 12-13% of the overall electricity generated
• PTC has tied up for power tolling arrangements (PTA), which
should play a crucial role in driving the future growth. Under the
arrangement, PTC will purchase coal and route it to the power
plant for generation in return for a fixed consideration. The power
generated will then be owned by PTC, which it will offer for sale
• The trading volumes for PTC have grown 2.5x over FY08-FY11.
Trading margins have also improved to ~4 paisa in FY09 to over 5
paisa in FY11
Going ahead
• Going ahead, we believe there will be a marked change in the mix
of volumes traded as significant quantum of long term PPA (PTC
as of now FY11 has signed 15220 MW worth of PPAs) will get
traded as the tied power projects get commissioned from FY12
onwards with trading margins of at least at 5 paisa per unit
• Going ahead, we expect volumes to increase to at a higher rate as
we expect electricity demand to grow by 1.1x of GDP growth and
accelerated capacity addition over FY12-FY17.
• We expect the share of long-term PPA to rise by 11% in FY11 to
over 40-45% till FY15-FY16, given long-term PPAs that are signed
by the company will get commissioned. This will provide good
visibility over revenue growth and stability in trading margins. We
expect it to be at 5-5.5 paisa per unit over next couple of years
• Also, commissioning of projects where PTC has participated in
the equity capital will also enhance the valuation of its strategic
investments on its balance sheet
Valuation
Macro headwinds have put pressure on the performance of the power
sector and PTC. Despite attractive valuations and robust balance sheet,
PTC is trading P/BV 1.1x on FY11. Also, huge cash balance (| 650 crore or
| 22 per share as on FY11) and strategic investment in various power
assets provide huge cushion to the valuations at current levels. Though
the stock can languish in the medium-term, it can be bought on a
staggered basis as we believe the stock is a potential compounder from a
three to five year perspective.
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