Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We were joined by Mr. PJV Sharma, Director- Strategy and Mr. MN Rao, GM
- F&A, who shared their outlook on the company.
To commission 64MW in Q2FY12E and 150MW in FY13E - Apart from 228MW in operation,
214MW is under construction. NBVL expects to commission 64MW in Orissa in Q2FY12
and 150MW in AP in FY13E. Further, about 420MW (captive coal based 300MW in Zambia
and 120MW hydro in Laos) is under development.
On the fuel side, NBVL currently makes significant use of washery rejects - ~20% of
current fuel requirements for 228MW and plans to use ~70% washery rejects for its under
construction capacities (214MW). Further, it also has a captive coal mine in Zambia, where
it is putting up a 300MW power plant based on low grade coal. After extracting low grade
coal, there is expected to be extra high grade coal in Zambia mines which it plans to trade.
The coal trading in Zambia is expected to start from Q3FY12 and reach 1mn MT by FY14E.
This is likely to provide hedge against coal prices.
In terms of off-take, most of capacities (except 300MW cost plus capacity in Zambia) are
open. But, it has an option of shifting to ferro alloys in a low tariff situation, giving it a natural
hedge.
Deal with Tata Steel for chrome - Recently, NBVL has signed a deal with Tata Steel to
produce and supply ferro chrome. Under the deal, NBVL will supply 35,000MT of chrome
for next three years at fixed cost plus Rs1000/MT. The power capacity to produce this is
about 17MW which would be transferred at Rs3.9/unit.
Ferro alloys production - It guided for production of 65,000MT (15% volume growth) of
silico manganese and 35,000MT (330% volume growth) of ferro chrome in FY12E.
Consequently, 40MW power capacity will be used as captive (20MW for ferro chrome and
20MW for silico manganese). We believe that in a scenario of volatility in ferro alloy prices,
the deal is likely to provide stability.
Indonesian coal mine - The management indicated some kind of a deal, which will ensure
returns on the investments made (USD 4mn) and also fuel supply originally planned.
Relatively better placed; Triggers - COD of 64MW and milestones in
Zambia
Considering better fuel security, natural hedge for fuel as well as offtake, NBVL is better
placed. Valuations at 4.7xFY13E earnings and 0.7xFY13E book already prices in the sector
headwinds and implies safer long term merchant rate of Rs2.9/unit. Key triggers - 1) COD
of 64MW in Q2FY12, (2) financial closure, EPC order, PPA in Zambia Project by Q3/Q412
and (3) start of coal trading from Zambia in Q3FY12. We have an ACCUMULATE rating with
a price target of Rs290/share. Key concerns - (1) low merchant prices coinciding with a
loss making scenario in ferro alloys, (2) restrictions of free sale of power by Gridco, (3)
high capital cost (750mn USD for 300MW) - inability to sign PPA at 20% equity IRR in
Zambia project and (4) domestic fuel and its pricing.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We were joined by Mr. PJV Sharma, Director- Strategy and Mr. MN Rao, GM
- F&A, who shared their outlook on the company.
To commission 64MW in Q2FY12E and 150MW in FY13E - Apart from 228MW in operation,
214MW is under construction. NBVL expects to commission 64MW in Orissa in Q2FY12
and 150MW in AP in FY13E. Further, about 420MW (captive coal based 300MW in Zambia
and 120MW hydro in Laos) is under development.
On the fuel side, NBVL currently makes significant use of washery rejects - ~20% of
current fuel requirements for 228MW and plans to use ~70% washery rejects for its under
construction capacities (214MW). Further, it also has a captive coal mine in Zambia, where
it is putting up a 300MW power plant based on low grade coal. After extracting low grade
coal, there is expected to be extra high grade coal in Zambia mines which it plans to trade.
The coal trading in Zambia is expected to start from Q3FY12 and reach 1mn MT by FY14E.
This is likely to provide hedge against coal prices.
In terms of off-take, most of capacities (except 300MW cost plus capacity in Zambia) are
open. But, it has an option of shifting to ferro alloys in a low tariff situation, giving it a natural
hedge.
Deal with Tata Steel for chrome - Recently, NBVL has signed a deal with Tata Steel to
produce and supply ferro chrome. Under the deal, NBVL will supply 35,000MT of chrome
for next three years at fixed cost plus Rs1000/MT. The power capacity to produce this is
about 17MW which would be transferred at Rs3.9/unit.
Ferro alloys production - It guided for production of 65,000MT (15% volume growth) of
silico manganese and 35,000MT (330% volume growth) of ferro chrome in FY12E.
Consequently, 40MW power capacity will be used as captive (20MW for ferro chrome and
20MW for silico manganese). We believe that in a scenario of volatility in ferro alloy prices,
the deal is likely to provide stability.
Indonesian coal mine - The management indicated some kind of a deal, which will ensure
returns on the investments made (USD 4mn) and also fuel supply originally planned.
Relatively better placed; Triggers - COD of 64MW and milestones in
Zambia
Considering better fuel security, natural hedge for fuel as well as offtake, NBVL is better
placed. Valuations at 4.7xFY13E earnings and 0.7xFY13E book already prices in the sector
headwinds and implies safer long term merchant rate of Rs2.9/unit. Key triggers - 1) COD
of 64MW in Q2FY12, (2) financial closure, EPC order, PPA in Zambia Project by Q3/Q412
and (3) start of coal trading from Zambia in Q3FY12. We have an ACCUMULATE rating with
a price target of Rs290/share. Key concerns - (1) low merchant prices coinciding with a
loss making scenario in ferro alloys, (2) restrictions of free sale of power by Gridco, (3)
high capital cost (750mn USD for 300MW) - inability to sign PPA at 20% equity IRR in
Zambia project and (4) domestic fuel and its pricing.
No comments:
Post a Comment