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COMPANY QUICK COMMENT
No negative surprises from NTPC’s annual analyst meeting. Key takeaways – (1) At Rs21.6bn, adjusted PAT is
marginally below par on account of lower incentives, in our view 2) PAF remained robust in 1QFY12; PLF lower due
to higher back-downs by SEBs 3) Bulk tendering orders (both 660MW & 800MW) to be awarded by Mar-12, if not
earlier 4) Management confident that the de-allocated captive coal blocks will be restored soon, 5) Coal requirement
for FY12 tied up, NTPC does not foresee any shortage going ahead. We continue to like the defensive growth profile
of NTPC. Maintain Buy.
Key takeaways from the analyst meeting
Adjusted net profit at ~Rs21.6bn; ~2% below our expectations on lower incentives
In our earnings note (1QFY12 – Net profit should have been 5-6% higher as RoE was grossed-up at corporate tax rate, dated 25
th
July), we noted that the magnitude of the ‘earnings miss’ may have been accentuated due to prior-period adjustments / extraordinary
items. In the analyst meeting today, management indicated a net prior-period tax adjustment of Rs0.65bn in 1QFY12; Adjusted for
this, normalized PAT for the quarter comes in at ~Rs21.6bn, marginally below our expectations. In our view, this is on account of
lower incentives as back-down instructions by SEBs resulted in a drop in savings in fuel costs and O&M expenses.
PAF remained robust in 1QFY12; PLF lower due to higher back-downs by SEBs
Plant Availability Factor (PAF) for coal and gas-fired capacity in 1QFY12 was 89.9% and 89.8%, respectively; marginally lower yoy.
However, PLF was significantly lower yoy at 86.9% for coal-based plants and 62.6% at gas-fired plants primarily due to higher backdown instructions by SEBs. Further, management highlighted that total backdown in the quarter was ~3.8 bn kWh as against only 0.9
bn kWh in 1QFY11. As per the management, shortage of fuel did not lead to any generation loss in the quarter.
FY12 capacity commissioning target maintained at 4980MW; 660MW at Sipat already commissioned
Management reiterated incremental capacity addition of 4320MW in FY12 (excl 660MW unit 1 already synchronized at Sipat). Of the
4320MW, 2000MW would be under JVs (1000MW each at Vallur and Jhajjar JVs). We peg stand-alone capacity commissioning in
FY12 at 2820MW.
FY12F coal requirement pegged at 164 mt; linkages/contracts already in place
As per the management, in terms of Indian thermal coal GCV, NTPC would require 164 mn tons of coal in FY12, of which 14 mn tons
of coal will be imported (equivalent to ~23 mn tons of Indian thermal coal). Management reiterated that coal availability is currently
not, and unlikely to be, an issue as existing linkages and MoUs with suppliers would be enough to meet the requirement (see exhibit
2 for details). We continue to believe and emphasize that as far as coal security is concerned NTPC rates very high vis-a-vis other
IPPs.
Management confident de-allocated captive coal blocks would be returned
Management remains confident that its 3 wholly owned captive coal blocks (Chhati Bariatu, Chhati Bariatu South and Kerandari), for
which notice of de-allocation has been issued by MoC, would be retained by the company; Mr I.C.P Keshari, Joint Secretary, Ministry
of Power (government nominee on NTPC’s board) also shared the same view. In the same vein, management reiterated its target of
achieving 47 mn tons of captive coal production by FY17F; expects production of 2.3 mn tons from Pakri Barwadih in FY13F.
Worst case (which will not materialize as per NTPC), even if the coal blocks are de-allocated, NTPC believes that it would recover
Rs1.8bn of capex already incurred in these 3 blocks and would be able to secure linkage coal for the power projects linked to these
mines. However, there was no mention of 2 the coal blocks which are in 50:50 JV with CIL (Brahmini and Chichro Patsimal)
Expects to place bulk tendering orders (both 660MW & 800MW) by Mar-12, if not earlier
NTPC expects the bulk tendering process for 9x660MW and 9x800MW units to be concluded definitely by Mar-12; although
management is confident of placing orders by Nov-Dec, 2011 itself. Currently, [1] tendering for the 9x660MW boilers is in litigation on
which NTPC expects Supreme Court’s decision in next 1-2 months, [2] there is no legal issue with the 800MW order tendering;
although environment approvals and coal linkages are yet to be finalized for a couple of projects that the management indicated
should be done within the timeline. Management expects to commission a sizeable portion of the capacity in the 12
th
plan itself as the
order will be placed with multiple vendors
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
COMPANY QUICK COMMENT
No negative surprises from NTPC’s annual analyst meeting. Key takeaways – (1) At Rs21.6bn, adjusted PAT is
marginally below par on account of lower incentives, in our view 2) PAF remained robust in 1QFY12; PLF lower due
to higher back-downs by SEBs 3) Bulk tendering orders (both 660MW & 800MW) to be awarded by Mar-12, if not
earlier 4) Management confident that the de-allocated captive coal blocks will be restored soon, 5) Coal requirement
for FY12 tied up, NTPC does not foresee any shortage going ahead. We continue to like the defensive growth profile
of NTPC. Maintain Buy.
Key takeaways from the analyst meeting
Adjusted net profit at ~Rs21.6bn; ~2% below our expectations on lower incentives
In our earnings note (1QFY12 – Net profit should have been 5-6% higher as RoE was grossed-up at corporate tax rate, dated 25
th
July), we noted that the magnitude of the ‘earnings miss’ may have been accentuated due to prior-period adjustments / extraordinary
items. In the analyst meeting today, management indicated a net prior-period tax adjustment of Rs0.65bn in 1QFY12; Adjusted for
this, normalized PAT for the quarter comes in at ~Rs21.6bn, marginally below our expectations. In our view, this is on account of
lower incentives as back-down instructions by SEBs resulted in a drop in savings in fuel costs and O&M expenses.
PAF remained robust in 1QFY12; PLF lower due to higher back-downs by SEBs
Plant Availability Factor (PAF) for coal and gas-fired capacity in 1QFY12 was 89.9% and 89.8%, respectively; marginally lower yoy.
However, PLF was significantly lower yoy at 86.9% for coal-based plants and 62.6% at gas-fired plants primarily due to higher backdown instructions by SEBs. Further, management highlighted that total backdown in the quarter was ~3.8 bn kWh as against only 0.9
bn kWh in 1QFY11. As per the management, shortage of fuel did not lead to any generation loss in the quarter.
FY12 capacity commissioning target maintained at 4980MW; 660MW at Sipat already commissioned
Management reiterated incremental capacity addition of 4320MW in FY12 (excl 660MW unit 1 already synchronized at Sipat). Of the
4320MW, 2000MW would be under JVs (1000MW each at Vallur and Jhajjar JVs). We peg stand-alone capacity commissioning in
FY12 at 2820MW.
FY12F coal requirement pegged at 164 mt; linkages/contracts already in place
As per the management, in terms of Indian thermal coal GCV, NTPC would require 164 mn tons of coal in FY12, of which 14 mn tons
of coal will be imported (equivalent to ~23 mn tons of Indian thermal coal). Management reiterated that coal availability is currently
not, and unlikely to be, an issue as existing linkages and MoUs with suppliers would be enough to meet the requirement (see exhibit
2 for details). We continue to believe and emphasize that as far as coal security is concerned NTPC rates very high vis-a-vis other
IPPs.
Management confident de-allocated captive coal blocks would be returned
Management remains confident that its 3 wholly owned captive coal blocks (Chhati Bariatu, Chhati Bariatu South and Kerandari), for
which notice of de-allocation has been issued by MoC, would be retained by the company; Mr I.C.P Keshari, Joint Secretary, Ministry
of Power (government nominee on NTPC’s board) also shared the same view. In the same vein, management reiterated its target of
achieving 47 mn tons of captive coal production by FY17F; expects production of 2.3 mn tons from Pakri Barwadih in FY13F.
Worst case (which will not materialize as per NTPC), even if the coal blocks are de-allocated, NTPC believes that it would recover
Rs1.8bn of capex already incurred in these 3 blocks and would be able to secure linkage coal for the power projects linked to these
mines. However, there was no mention of 2 the coal blocks which are in 50:50 JV with CIL (Brahmini and Chichro Patsimal)
Expects to place bulk tendering orders (both 660MW & 800MW) by Mar-12, if not earlier
NTPC expects the bulk tendering process for 9x660MW and 9x800MW units to be concluded definitely by Mar-12; although
management is confident of placing orders by Nov-Dec, 2011 itself. Currently, [1] tendering for the 9x660MW boilers is in litigation on
which NTPC expects Supreme Court’s decision in next 1-2 months, [2] there is no legal issue with the 800MW order tendering;
although environment approvals and coal linkages are yet to be finalized for a couple of projects that the management indicated
should be done within the timeline. Management expects to commission a sizeable portion of the capacity in the 12
th
plan itself as the
order will be placed with multiple vendors
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