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Power
ƒ Capacity addition gathers pace in coverage universe
In YTD FY12 (April-August 2011), aggregate incremental capacity
addition was 6369 MW (3808 MW in April-August 2010). Our coverage
universe has added 1685 MW during this quarter of which 1525 MW
have been commercialised. The installed capacity currently stands at
1,81,588 MW. Electricity generation during April-August 2011 has
increased by 9.4% YoY. Average base deficit during April-August 2011
was 5.8% (decline of 429 bps YoY) while average peak deficit was 9.0%
(decline of 303 bps YoY). Under our coverage universe, JPVL has the
highest capacity addition (750MW) in this quarter.
ƒ Merchant power rates marginally on YoY basis
Merchant power rates have declined ~10% QoQ and 2% YoY in
Q2FY12 (traditionally the weakest quarter for merchant rates). We
expect companies with merchant power exposure (Lanco Infratech, Tata
Power, JPVL) to report realisation in the range of ~| 3.4-3.8/Kwhr.
ƒ Higher coal prices, back down by SEBs still key headwinds
During Q2FY12, international spot thermal coal prices (6700 kcal)
remained flat (0.2% increase) on a QoQ basis. However, a decline in
merchant prices and change in Indonesian law (with reference to pricing
of imported coal) would put profitability of merchant IPP (based on
imported coal) under pressure. Companies like NTPC have faced back
downs by SEBs (for gas based power) in this quarter.
ƒ Tariff hikes at last; freeze on short-term loans for SEBs
In FY12, nine SEBs have hiked tariffs ranging from 1-30%. Going
forward, we anticipate more hikes in the offing (we expect the next hike
from Tamil Nadu SEB). Additionally, banks and financial institutions
have tightened norms for SEBs for short -term loans.
ƒ PAT, EBITDA to decline YoY but increase QoQ
From our coverage universe, we expect EBITDA margins to marginally
increase QoQ (due to limited exposure of our coverage universe to
merchant power and capacity additions in the previous quarters) but
decline by 200 bps YoY. Higher depreciation & interest cost of newly
commissioned projects would lead to PAT decline of 8% YoY. We
except JPVL to report robust results on the back of ongoing capacity
addition at the Karcham project.
Company specific view
Company Remarks
NTPC We expect NTPC to sell 47.89 BU in Q2FY12, a decline of 2.5% YoY mainly due to a
fall in production & back-down by SEBs (for its gas-based power plants). We expect
realisation to be ~ | 2.61 per unit (based on grossing of tariff on pre-tax RoE of 23%).
In Q2FY12, it has commercialised 500 MW in Simhadri
NHPC We expect NHPC to sell ~7150 MUs in Q2FY12. Per unit realisation is expected to be
| 1.74 per unit (same as Q2FY11). We expect topline and PAT growth to remain flat
YoY (since no capacity has been commissioned)
Neyveli Lignite The company is expected to report topline and bottomline growth of 1% and 2%,
respectively. The company is expected to sell ~4364 MUs, up 1% YoY. No
incremental capacity has been added in this quarter. We have built in a realisation
rate of | 2.46/unit
JP Hydro We have built in sales of ~2883 MUs in Q2FY12. We expect average realisation of |
2.33 per unit. During the quarter, the company has commissioned 1000 MW of
Karcham Wangtoo. We expect revenue growth and PAT growth of 140% (on a YoY
basis) due to capacity addition of Karcham Wangtoo
PTC India We expect PTC to report trading volumes of 9000 MUs for Q2FY12E, implying 17%
YoY growth. We have built in trading margins of 5.4 paisa per unit and average
realisation for Q2FY12 at |3.8 per unit. We expect PAT growth of 14% YoY
Lanco Infratech
**
The company has sold ~ 2850 MUs. We expect merchant power realisation to be |
3.6/kwhr. We expect revenue de-growth of 9% YoY (lower merchant realisation). We
expect EBITDA to increase by 7% (higher margin from Griffin Resources). However,
we expect higher depreciation and interest cost to lead to PAT de-growth of 11%
Tata Power We expect sales growth of 18% (led by higher coal realisation) and bottomline degrowth of 30% YoY (higher other income last year and higher depreciation this quarter
due commissioning of Maithon 525 MW). We expect coal realisation at $87/tonne in
Bumi resources with volume of 15.3 MT
Source: Company, ICICIdirect.com Research
**One offs like higher inter segment elimination; other income may impact PAT growth
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