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Reliance Infrastructure — Big regulatory win -
Mumbai license & cross-subsidy
Country Overview
Retain Mumbai license; Cross-subsidy to deter shift; Buy
RELI had a major regulatory victory which should reduce stock overhang. This
includes a) extend Mumbai power distribution license for 25 years, b) allowed
RELI to collect Rs23.2bn of accumulated recovery of revenue gap for FY09-11
with carrying cost and c) proposed to levy a cross-subsidy surcharge (CSS) and
also to recover charges against regulatory assets from its consumers who have
shifted to Tata Power. This should deter migration of customers. Buy RELI on: a)
Bottoming of Mumbai license area (MLA) profit, b) pick-up in execution – start of
Delhi Metro, 4488 lane kms / 10 toll roads & 900MW Rosa TPP in FY12, cash
chest (>Rs75bn), Cons. P/BV of 0.59x FY11A. Risk: delay in Rs160bn
Krishnapatnam UMPP E&C order, delay in execution at R. Power (44% of SOTP)
and group concerns, may limit the stock upside near term.
RELI retains power distribution for sub-urban Mumbai
RELI has won the electricity supply license to entire suburban Mumbai for the
next 25 years from MERC. There were four other applicants for the license viz,
Lanco, India Bulls, MSEDCL and Torrent. However, MERC rejected them mainly
on a) lack of ‘wire and supply' business and b) they had applied for license for
smaller areas.
Levy CSS on its consumers migrated to Tata to check loss
MERC proposed RELI to a) levy a CSS and b) recover charges against regulatory
assets from its consumers (mostly commercial and also includes residential using
>300units / month) who have shifted to Tata Power. Over 100K RELI’s
consumers (mostly commercial) had shifted to Tata, who had earlier subsidized
the tariff of most low-end consumers in the suburbs by paying more than the
actual tariff. The surcharge will be applicable retrospectively from the date of
migration and will be announced once the Open Access policy is finalized.
Imposition of CSS shall create level playing field, check cherry-picking and deter
loss of RELI customers to TPC.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Reliance Infrastructure — Big regulatory win -
Mumbai license & cross-subsidy
Country Overview
Retain Mumbai license; Cross-subsidy to deter shift; Buy
RELI had a major regulatory victory which should reduce stock overhang. This
includes a) extend Mumbai power distribution license for 25 years, b) allowed
RELI to collect Rs23.2bn of accumulated recovery of revenue gap for FY09-11
with carrying cost and c) proposed to levy a cross-subsidy surcharge (CSS) and
also to recover charges against regulatory assets from its consumers who have
shifted to Tata Power. This should deter migration of customers. Buy RELI on: a)
Bottoming of Mumbai license area (MLA) profit, b) pick-up in execution – start of
Delhi Metro, 4488 lane kms / 10 toll roads & 900MW Rosa TPP in FY12, cash
chest (>Rs75bn), Cons. P/BV of 0.59x FY11A. Risk: delay in Rs160bn
Krishnapatnam UMPP E&C order, delay in execution at R. Power (44% of SOTP)
and group concerns, may limit the stock upside near term.
RELI retains power distribution for sub-urban Mumbai
RELI has won the electricity supply license to entire suburban Mumbai for the
next 25 years from MERC. There were four other applicants for the license viz,
Lanco, India Bulls, MSEDCL and Torrent. However, MERC rejected them mainly
on a) lack of ‘wire and supply' business and b) they had applied for license for
smaller areas.
Levy CSS on its consumers migrated to Tata to check loss
MERC proposed RELI to a) levy a CSS and b) recover charges against regulatory
assets from its consumers (mostly commercial and also includes residential using
>300units / month) who have shifted to Tata Power. Over 100K RELI’s
consumers (mostly commercial) had shifted to Tata, who had earlier subsidized
the tariff of most low-end consumers in the suburbs by paying more than the
actual tariff. The surcharge will be applicable retrospectively from the date of
migration and will be announced once the Open Access policy is finalized.
Imposition of CSS shall create level playing field, check cherry-picking and deter
loss of RELI customers to TPC.
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