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India Equity Research Reports, IPO and Stock News
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We were joined by Mr. Vibhu Agarwal and Mr. Saurabh Garg from the investor
relations team, who shared their outlook on the company.
Power projects commissioning - Including capacity synchronized, Lanco at 3,274MW
(854MW gas based, 600MW domestic coal based and 1,200MW imported coal based) is
currently India's largest private power producer. Further, the company has 5,948MW (646MW
Hydro, 742MW gas and balance coal) capacities under various stages of construction. Of
the under construction capacities, 1,040MW are likely to commission by FY12E and the
rest by FY14E. Specific timelines - Anpara Unit I & II - H1FY12, Budhil - H1FY12, Udupi II -
Q3FY12 (still facing evacuation issues), Kondapalli III - end of FY12
Coal for Amarkantak II - The ambiguity on coal supplies after MOP's new linkage policy
has been cleared by CEA. CEA has indicated that the current FSA with SECL will continue.
Merchant rates for FY11 stood at Rs4.25/unit (Kondapalli) and Rs4.57/unit (Amarkantak).
It expects rates of around Rs3.8-4.0/unit in FY12E.
EPC business - EPC business performance in FY11 has been impacted due to
postponement of milestones, which impacted both the revenues as well as margins.
Further, the elimination in EPC business on consolidation will remain high with most of
the revenues now coming from subsidiaries.
Griffin acquisition consideration of $550mn (upfront payment) is entirely funded by debt
(annual interest cost of $20mn). Consolidated numbers for FY11 include (only 1 month
numbers) revenues from Griffin mines of Rs1.3bn. EBITDA margins for Griffin stood at
36%. However, management indicated these numbers should not be taken at face value
as there might be one-offs in this. Future capex at Griffin to start only after certain clearances
are obtained (which will take ~ 12-18 months).
During FY11, revenues and EBITDA from Udupi unit I was not included in consolidation, as
it was consolidated as an associate company (to the extent of 26%). Amarkantak II - the
case on Haryana regarding tariffs is pending with APTEL. As a result of this, the billing has
not started yet though it has started supplying power to Haryana (65% of capacity). Since
April 2011, Kondapalli II is getting good gas supplies and hence, is currently operating at
higher PLFs. Kondapalli III on the list to get gas allocation as the plant is expected to be
commissioned before Mar'12.
Fuel cost pass through in most of the capacities - Lanco has about 20mn MT of domestic
coal linkages. However, considering highest linkages, Lanco has an option to comply with
the pre-conditions and get some coal (we assume 50%) - which should keep its cost of
generation under check. Further, it has almost 65% of its capacity with fuel cost pass
through.
Law suit - Lanco management remains very confident on its case in the lawsuit (USD
3.5bn claim) filed by Perdaman in Australia. The hearing in the case is scheduled to start
in the current month.
Valuations price in negatives; Triggers- Udupi II/Anpara COD & clarity on lawsuit - At
0.8xFY13E book, negatives are priced in, with stock implying LT merchant tariff of Rs2.7/
unit (relatively low). Triggers - 1) COD of Udupi II/Anpara, 2) better EPC margins & 3) clarity
on law suit. Concerns - domestic coal supplies, especially for merchant, Kondapalli III
gas, merchant prices & high debt.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We were joined by Mr. Vibhu Agarwal and Mr. Saurabh Garg from the investor
relations team, who shared their outlook on the company.
Power projects commissioning - Including capacity synchronized, Lanco at 3,274MW
(854MW gas based, 600MW domestic coal based and 1,200MW imported coal based) is
currently India's largest private power producer. Further, the company has 5,948MW (646MW
Hydro, 742MW gas and balance coal) capacities under various stages of construction. Of
the under construction capacities, 1,040MW are likely to commission by FY12E and the
rest by FY14E. Specific timelines - Anpara Unit I & II - H1FY12, Budhil - H1FY12, Udupi II -
Q3FY12 (still facing evacuation issues), Kondapalli III - end of FY12
Coal for Amarkantak II - The ambiguity on coal supplies after MOP's new linkage policy
has been cleared by CEA. CEA has indicated that the current FSA with SECL will continue.
Merchant rates for FY11 stood at Rs4.25/unit (Kondapalli) and Rs4.57/unit (Amarkantak).
It expects rates of around Rs3.8-4.0/unit in FY12E.
EPC business - EPC business performance in FY11 has been impacted due to
postponement of milestones, which impacted both the revenues as well as margins.
Further, the elimination in EPC business on consolidation will remain high with most of
the revenues now coming from subsidiaries.
Griffin acquisition consideration of $550mn (upfront payment) is entirely funded by debt
(annual interest cost of $20mn). Consolidated numbers for FY11 include (only 1 month
numbers) revenues from Griffin mines of Rs1.3bn. EBITDA margins for Griffin stood at
36%. However, management indicated these numbers should not be taken at face value
as there might be one-offs in this. Future capex at Griffin to start only after certain clearances
are obtained (which will take ~ 12-18 months).
During FY11, revenues and EBITDA from Udupi unit I was not included in consolidation, as
it was consolidated as an associate company (to the extent of 26%). Amarkantak II - the
case on Haryana regarding tariffs is pending with APTEL. As a result of this, the billing has
not started yet though it has started supplying power to Haryana (65% of capacity). Since
April 2011, Kondapalli II is getting good gas supplies and hence, is currently operating at
higher PLFs. Kondapalli III on the list to get gas allocation as the plant is expected to be
commissioned before Mar'12.
Fuel cost pass through in most of the capacities - Lanco has about 20mn MT of domestic
coal linkages. However, considering highest linkages, Lanco has an option to comply with
the pre-conditions and get some coal (we assume 50%) - which should keep its cost of
generation under check. Further, it has almost 65% of its capacity with fuel cost pass
through.
Law suit - Lanco management remains very confident on its case in the lawsuit (USD
3.5bn claim) filed by Perdaman in Australia. The hearing in the case is scheduled to start
in the current month.
Valuations price in negatives; Triggers- Udupi II/Anpara COD & clarity on lawsuit - At
0.8xFY13E book, negatives are priced in, with stock implying LT merchant tariff of Rs2.7/
unit (relatively low). Triggers - 1) COD of Udupi II/Anpara, 2) better EPC margins & 3) clarity
on law suit. Concerns - domestic coal supplies, especially for merchant, Kondapalli III
gas, merchant prices & high debt.
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