Adani Power- Appellate Tribunal rejects company’s plea 􀂄 UBS

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


UBS Investment Research
Adani Power
A ppellate Tribunal rejects company’s plea
􀂄 Event: Tribunal rejects Adani Power’s plea in 1,000MW PPA case
The Appellate Tribunal for Electricity has rejected the company's argument that a
low tariff bid (Rs2.35/unit) was contingent on Adani Power receiving coal supply
from GMDC (a Gujarat Government company). The Tribunal has directed that
Adani Power’s 1,000MW power purchase agreement (PPA) with Gujarat Urja
Vikas Nigam Limited (GVUVNL) remains valid and the company would have to
supply power to GUVNL at these rates (levelised tariff of Rs2.35/unit).
􀂄 Impact: no impact on our numbers as we assume the PPA tariffs only
The verdict is negative for Adani Power as in the absence of domestic coal supply
from GMDC, the Mundra power projects would use imported coal. However, there
is no adverse impact on our numbers as we had already assumed that the PPA
would remain valid and the tariffs would not be revised upwards. We have also not
factored in domestic coal availability in our estimates.
􀂄 Action: we are negative on the stock as risks do not seem to be priced in
We like the company for its strong execution, but believe that the current share
price does not fully factor in the risks such as: a) a decline in merchant tariffs; and
b) no fuel escalation in its long-term PPAs. Hence, we believe the stock may have
some more downside at current levels.
􀂄 Valuation: maintain Sell and price target of Rs80
We derive our price target using a plant-by-plant DCF assuming COE of 13.8% for
under-construction projects and 12.3% for operational projects. We currently value
6,600MW capacity (4,620MW of Mundra and 1,980MW of Tiroda).