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Tata Power Company (TTPW.BO)
Buy Equity Research
Unit 1 of Maithon commissioned; Mundra on track; Buy
What's changed
Tata Power announced that Unit 1 (525MW) of Maithon has commissioned on
full load and they are on track for commissioning of Unit 2 shortly. Further, per
Economic Times, Tata Power is on track for commissioning of Unit 1 (800MW)
of Mundra power project by Sept 2011 and Unit 2 by March 2012. Though
there could be some transmission constraints initially for the evacuation of
power, newsflow indicate that Power Grid is fast tracking construction of
transmission lines to minimize loss of generation capacity.
Implications
We believe commissioning of Unit 1 of Maithon (about 13% of FY12E net
profit contribution), is positive as TPWR benefits from higher realizations.
With PPA commencing in April 2013, about 310MW of Unit 1 for FY12E is
sold under short-term contacts at Rs3.45/kwh and improves the operating
cash flows. Though this project is based on linkage coal, we believe fuel
risk is low as: 1)it procures about 40% of its requirements from Tata Steel;
and 2) the project operates on regulated mechanism from FY13E and
higher fuel costs, if any, are a pass-through.
While the timely commissioning of the Mundra power plant would reduce
the cyclicality of TPWR earnings, we have reflected the risks of higher fuel
costs of Mundra plant in our earnings estimates. At current coal price
assumptions, we estimate Mundra to incur a loss of about Rs0.51/0.48
/0.44/kwh for FY12E/13E/14E.
Valuation
We re-terate our Buy with a 12-m SOTP based TP of Rs1436 implying a
potential upside of 10%. While the existing business (which is largely
regulated) offers downside protection to Tata Power, we believe newsflow
on progress of projects under development and construction will be key
catalysts for the stock.
Key risks
Delay in pre-construction activities of projects under development.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Coverage View: Cautious
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Power Company (TTPW.BO)
Buy Equity Research
Unit 1 of Maithon commissioned; Mundra on track; Buy
What's changed
Tata Power announced that Unit 1 (525MW) of Maithon has commissioned on
full load and they are on track for commissioning of Unit 2 shortly. Further, per
Economic Times, Tata Power is on track for commissioning of Unit 1 (800MW)
of Mundra power project by Sept 2011 and Unit 2 by March 2012. Though
there could be some transmission constraints initially for the evacuation of
power, newsflow indicate that Power Grid is fast tracking construction of
transmission lines to minimize loss of generation capacity.
Implications
We believe commissioning of Unit 1 of Maithon (about 13% of FY12E net
profit contribution), is positive as TPWR benefits from higher realizations.
With PPA commencing in April 2013, about 310MW of Unit 1 for FY12E is
sold under short-term contacts at Rs3.45/kwh and improves the operating
cash flows. Though this project is based on linkage coal, we believe fuel
risk is low as: 1)it procures about 40% of its requirements from Tata Steel;
and 2) the project operates on regulated mechanism from FY13E and
higher fuel costs, if any, are a pass-through.
While the timely commissioning of the Mundra power plant would reduce
the cyclicality of TPWR earnings, we have reflected the risks of higher fuel
costs of Mundra plant in our earnings estimates. At current coal price
assumptions, we estimate Mundra to incur a loss of about Rs0.51/0.48
/0.44/kwh for FY12E/13E/14E.
Valuation
We re-terate our Buy with a 12-m SOTP based TP of Rs1436 implying a
potential upside of 10%. While the existing business (which is largely
regulated) offers downside protection to Tata Power, we believe newsflow
on progress of projects under development and construction will be key
catalysts for the stock.
Key risks
Delay in pre-construction activities of projects under development.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Coverage View: Cautious
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