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Reliance Infrastructure
Limited
F2012: A Big Year for EPC
Quick Comment: Reliance Infrastructure reported
F4Q12 standalone revenue of Rs57.3bn (up 142% YoY),
EBITDA of Rs6.2bn (up 136% YoY), PBT of Rs5.3 bn
(up 30% YoY) and PAT of Rs6.6bn (up 84% YoY).
Revenue was 30% higher than our estimate, but
EBITDA was 9% below and PBT 11% below. The strong
revenue growth, fueled primarily by EPC revenue of
Rs43.8bn vs. our forecast of Rs28bn, was muted by the
150 bps QoQ fall in EPC EBIT margins. While negative
tax in F4Q (deferred tax assets created and previous
year taxes included) pushed up PAT, full-year PBT of Rs
23.3 bn was 3% below our estimate.
Consolidated revenue for the quarter was Rs71.4bn (up
81% YoY), EBITDA was Rs5bn (up 48% YoY), and PAT
was Rs4.1bn (up 28% YoY). Interest expense for the
quarter was high; the infrastructure segment continued
to contribute negative EBIT to the consolidated results.
Consolidated book value was Rs918/sh at end F2012.
Key highlights:
• EPC: F2012 EPC revenue was Rs117bn (up 245%
YoY). We believe significant progress made in
Reliance Power’s Sasan and Samalkot projects was
the key reason for the ramp-up in EPC revenue. The
company expects similar revenue in F2013. The
EPC order book currently stands at Rs173bn.
• Infrastructure: Infrastructure revenue for the
quarter was Rs925mn (up 85% YoY). However, the
segment remained loss-aking with a negative EBIT
margin of about 29% in the quarter. The company
has invested Rs43.6 bn in the infra SPVs
(Rs166/sh).
0.5x trailing consolidated P/B is undemanding, but
lack of earnings triggers keeps us Equal-weight:
Execution on Reliance Power and infrastructure projects
will be critical for stock performance along with an
improvement in the macro environment.
Other Details
• Mumbai Distribution: The company collected cross
subsidy surcharge of Rs500 mn in F2012 and hopes this
will stem the migration of consumers. It has also submitted
to MERC its plan to recover Rs48bn of regulatory assets
over six years.
• Delhi Distribution: The company has received Rs20 bn
of debt from IDFC as part of the Rs51 bn debt package
formalized with IDBI. The company is expecting DERC to
announce tariff hikes by mid-June.
• Consolidated debt stands at about Rs 179 bn with a
debt:equity ratio of 0.74.
Update on the Infrastructure Business and
developments in Reliance Power
The company is currently operating/developing 11 road, three
metro rail, five transmission, five airport and two cement
projects. Details of the various verticals are as follows:
Roads
The company is currently developing 11 projects totaling about
1,000 km worth approximately Rs 120 bn. Currently, there are
five operational road projects and five more road projects are
expected to start generating revenue in 2012.
Metro Rail Projects
The company is the largest private sector metro rail developer
in the country with three metro rail projects in two cities. The
three metro rail projects are together worth Rs 170 bn and
encompass a total stretch of 67 km and 45 stations.
Delhi Airport Express Link: Started commercial operations in
February 2011 and has now reached a ridership of 20,000
passengers per day. The trains are running for 18 hours/day
with a frequency of 12 minutes during peak hours and 15
minutes during non-peak hours. The company is in the process
of signing deals for retail and advertising with vendors and has
already closed retail deals for about 60,000 sq ft.
Mumbai Metro Line 1: Has received viability gap funding of
Rs4.2 bn and about 92% of the civil work for the project has
been completed. The project is scheduled to be commissioned
within F2013.
Mumbai Metro Line 2: The company has completed
pre-construction activities and is awaiting the handover of the
depot land for construction to begin.
Transmission Projects
The company is currently developing five transmission projects
including two UMTPs, with a total investment outlay of Rs 66
bn.
WRSS project: Five lines out of nine have started generating
revenue. More than 90% of tower foundation work and 50% of
stringing work has been completed and the full project is
expected to be operational within 2012.
Mumbai Strengthening project: Progressing well – 7 EHV
stations have been charged (4 in F2012) and have registered
an availability of 99.77%.
In addition, the company is developing two ultra mega
Transmission projects (North Karanpura and Talcher II) and
the Parbati-Koldam project.
Cement
The company expects to reach a capacity of 10 mt in the next
two years in Maharashtra and Madhya Pradesh.
Environmental clearance has been received for both the
projects and major orders placed. The Butibori grinding and
blending unit is expected to be completed in F2Q13 and the
Madhya Pradesh plant to be commissioned in F3Q14.
Updates on Reliance Power
Rosa I: Generation from the plant in F2012 increased 49%
YoY at an average PLF of 80.5% in F2012 vs. a PLF of 61% in
F2011. Plant availability in the same period was 86.6%. In
F4Q12, the plant ran at an average PLF of 80.7% and achieved
a PAF of 91.7%. PLF in F2012 was lower by 6.23% due to SEB
back-downs. In F2012, the plant operated on a mix of 60%
linkage coal, 25% imported coal and 15% of e-auction coal and
washery rejects. Having signed FSAs with Coal India, the
company expects the materialization of coal from Coal India to
increase.
The profit from the plant in F2012 stood at Rs 3.35 bn and the
company earned an ROE of about 35% which comprises of
16% assured ROE and efficiency-linked gains (on heat rate,
O&M expenses and savings on interest on working capital).
The receivables position remains good with all billed dues of
F2012 having been collected by mid-April 2012.
Rosa II: The company has completed the commissioning of
the plant with the commissioning of the second 300 MW unit in
F4Q12. Coal India will continue to supply coal under the MoU
route for the last unit till the FSA is signed.
The entire 1,200 MW capacity of Rosa I&II has operated at a
PLF of 85.3% in April 2012 and achieved an availability of
92.8%.
Butibori: Steam blowing has been completed for unit 1 and the
company expects to synchronize the unit by the first week of
June. Work for the commissioning of unit 2 is progressing well
with the boiler hydro test having been completed. All key
auxiliaries for the plant have been commissioned as well. The
company will sell 147 MW from 1st unit to Reliance
Infrastructure’s Mumbai distribution business and the balance
to industrial consumers. The company is seeking to tie up the
second 300 MW unit with R Infra as well. The company has
sought a relaxation in the FSA rules to allow medium-term
PPAs as well as PPAs with open access consumers to be
considered for granting of FSAs.
2,400 MW Samalkot expansion project: The company has
synchronized 2 gas turbines (GTs) at the project and tested two
more GTs at Full Speed No Load (FSNL). The company hopes
to complete the combined cycle construction for two units by
year end. The company is in favor of pooling of domestic
natural gas and imported LNG for all customers and hopes the
proposal is implemented.
Sasan UMPP: The boiler hydro test has been completed for
unit 1 and the TG and ancillary erection is in progress for the
unit. Currently pressure part erection is being carried out for the
first three units and structure erection for the latter three. The
company is hopeful of commissioning the first unit by Dec 2012.
After that, the company expects to commission one unit every
quarter.
Chitrangi: All of the government land for the project is now
under possession and the private land awarded.
Environmental clearance has been received for the project and
site leveling work has been completed. The company is waiting
for forest clearance for the Chhatrasal coal block to be granted
before commencing construction work for the project. EGoM
approval for the diversion of excess coal from the Sasan UMPP
mines has already been received.
Krishnapatnam: The company perceives the change in
regulations in Indonesia on the pricing of coal as a force
majeure event. However. that has not been accepted by the
beneficiary states and hence the company has put the project
on hold pending a resolution of the impasse. As a next step, the
company hopes to go into arbitration with the beneficiary states
soon.
Tilaiya UMPP: The ownership of 186 acres of private land has
been transferred to the company. The company is awaiting
final approval for 167 acres of government land and the grant
of stage 2 forest clearance for 1,220 acres of forest land. The
company has completed the R&R survey for the power plant
area and has submitted its R&R plan to the district
administration. The decision on diversion of excess coal from
the mines attached to the project will now be made in
accordance with the policy on excess coal to be formulated by
the government.
Renewables: The company has commercialized a 40 MW
solar PV project in Rajasthan in March and expects generation
of 70 MU from the project annually. The panels for the project
were supplied by First Solar while L&T and R Infra EPC carried
out the construction activities. A 25 year PPA for the project
has been signed with the distribution arm of R Infra at a tariff of
Rs 17.91/unit. The company is also developing a 100 MW
concentrated solar power project in Rajasthan where the
offtaker will be NVVN at a tariff of Rs 11.97/unit. The equipment
for the project will be supplied by Areva and the construction
work is expected to start soon. The PPA will commence from
May 2013. A 200 MW wind project is also under development
at Vashpet. The first 45 MW at the project will be commissioned
by September 2012. This project too will sell to the distribution
business of Reliance Infrastructure at Rs 5.67/unit.
Captive Fuel: The company has 25 mtpa of captive coal
attached to the Sasan project and 40 mtpa for the Tilaiya
project. Besides this, the company will have 30 mtpa of coal
mining capacity in Indonesia and also has 8.5 mmscmd of CBM
blocks allocated. At the Moher and Moher Amhlori coal blocks
allocated to the Sasan UMPP, the company has assembled all
major equipment at the site and has already finished
overburden removal of 3.8 mcm. The company expects to
commence production from the mines in F2Q13. Production
ramp up from the mines will be in sync with the commissioning
of the Sasan UMPP. The Chhatrasal coal block, also attached
to the Sasan UMPP, is still awaiting forest clearance and the
company expects the same to be granted by the GoM soon.
For its Indonesian mining plans, the company has commenced
the process of land acquisition and acquired 261 acres of the
710 acres required. The company expects to begin production
from its mines in Indonesia by F2013 end. Initially coal would
need to be evacuated on barges up to a capacity of 7.5 mtpa.
The company will have to wait for the rail infrastructure to be
available at the site in about three years to increase the
capacity beyond 7.5 mtpa.
Capex: The company expects to incur capex of about Rs120
bn in F2013, which would be largely funded through debt.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Reliance Infrastructure
Limited
F2012: A Big Year for EPC
Quick Comment: Reliance Infrastructure reported
F4Q12 standalone revenue of Rs57.3bn (up 142% YoY),
EBITDA of Rs6.2bn (up 136% YoY), PBT of Rs5.3 bn
(up 30% YoY) and PAT of Rs6.6bn (up 84% YoY).
Revenue was 30% higher than our estimate, but
EBITDA was 9% below and PBT 11% below. The strong
revenue growth, fueled primarily by EPC revenue of
Rs43.8bn vs. our forecast of Rs28bn, was muted by the
150 bps QoQ fall in EPC EBIT margins. While negative
tax in F4Q (deferred tax assets created and previous
year taxes included) pushed up PAT, full-year PBT of Rs
23.3 bn was 3% below our estimate.
Consolidated revenue for the quarter was Rs71.4bn (up
81% YoY), EBITDA was Rs5bn (up 48% YoY), and PAT
was Rs4.1bn (up 28% YoY). Interest expense for the
quarter was high; the infrastructure segment continued
to contribute negative EBIT to the consolidated results.
Consolidated book value was Rs918/sh at end F2012.
Key highlights:
• EPC: F2012 EPC revenue was Rs117bn (up 245%
YoY). We believe significant progress made in
Reliance Power’s Sasan and Samalkot projects was
the key reason for the ramp-up in EPC revenue. The
company expects similar revenue in F2013. The
EPC order book currently stands at Rs173bn.
• Infrastructure: Infrastructure revenue for the
quarter was Rs925mn (up 85% YoY). However, the
segment remained loss-aking with a negative EBIT
margin of about 29% in the quarter. The company
has invested Rs43.6 bn in the infra SPVs
(Rs166/sh).
0.5x trailing consolidated P/B is undemanding, but
lack of earnings triggers keeps us Equal-weight:
Execution on Reliance Power and infrastructure projects
will be critical for stock performance along with an
improvement in the macro environment.
Other Details
• Mumbai Distribution: The company collected cross
subsidy surcharge of Rs500 mn in F2012 and hopes this
will stem the migration of consumers. It has also submitted
to MERC its plan to recover Rs48bn of regulatory assets
over six years.
• Delhi Distribution: The company has received Rs20 bn
of debt from IDFC as part of the Rs51 bn debt package
formalized with IDBI. The company is expecting DERC to
announce tariff hikes by mid-June.
• Consolidated debt stands at about Rs 179 bn with a
debt:equity ratio of 0.74.
Update on the Infrastructure Business and
developments in Reliance Power
The company is currently operating/developing 11 road, three
metro rail, five transmission, five airport and two cement
projects. Details of the various verticals are as follows:
Roads
The company is currently developing 11 projects totaling about
1,000 km worth approximately Rs 120 bn. Currently, there are
five operational road projects and five more road projects are
expected to start generating revenue in 2012.
Metro Rail Projects
The company is the largest private sector metro rail developer
in the country with three metro rail projects in two cities. The
three metro rail projects are together worth Rs 170 bn and
encompass a total stretch of 67 km and 45 stations.
Delhi Airport Express Link: Started commercial operations in
February 2011 and has now reached a ridership of 20,000
passengers per day. The trains are running for 18 hours/day
with a frequency of 12 minutes during peak hours and 15
minutes during non-peak hours. The company is in the process
of signing deals for retail and advertising with vendors and has
already closed retail deals for about 60,000 sq ft.
Mumbai Metro Line 1: Has received viability gap funding of
Rs4.2 bn and about 92% of the civil work for the project has
been completed. The project is scheduled to be commissioned
within F2013.
Mumbai Metro Line 2: The company has completed
pre-construction activities and is awaiting the handover of the
depot land for construction to begin.
Transmission Projects
The company is currently developing five transmission projects
including two UMTPs, with a total investment outlay of Rs 66
bn.
WRSS project: Five lines out of nine have started generating
revenue. More than 90% of tower foundation work and 50% of
stringing work has been completed and the full project is
expected to be operational within 2012.
Mumbai Strengthening project: Progressing well – 7 EHV
stations have been charged (4 in F2012) and have registered
an availability of 99.77%.
In addition, the company is developing two ultra mega
Transmission projects (North Karanpura and Talcher II) and
the Parbati-Koldam project.
Cement
The company expects to reach a capacity of 10 mt in the next
two years in Maharashtra and Madhya Pradesh.
Environmental clearance has been received for both the
projects and major orders placed. The Butibori grinding and
blending unit is expected to be completed in F2Q13 and the
Madhya Pradesh plant to be commissioned in F3Q14.
Updates on Reliance Power
Rosa I: Generation from the plant in F2012 increased 49%
YoY at an average PLF of 80.5% in F2012 vs. a PLF of 61% in
F2011. Plant availability in the same period was 86.6%. In
F4Q12, the plant ran at an average PLF of 80.7% and achieved
a PAF of 91.7%. PLF in F2012 was lower by 6.23% due to SEB
back-downs. In F2012, the plant operated on a mix of 60%
linkage coal, 25% imported coal and 15% of e-auction coal and
washery rejects. Having signed FSAs with Coal India, the
company expects the materialization of coal from Coal India to
increase.
The profit from the plant in F2012 stood at Rs 3.35 bn and the
company earned an ROE of about 35% which comprises of
16% assured ROE and efficiency-linked gains (on heat rate,
O&M expenses and savings on interest on working capital).
The receivables position remains good with all billed dues of
F2012 having been collected by mid-April 2012.
Rosa II: The company has completed the commissioning of
the plant with the commissioning of the second 300 MW unit in
F4Q12. Coal India will continue to supply coal under the MoU
route for the last unit till the FSA is signed.
The entire 1,200 MW capacity of Rosa I&II has operated at a
PLF of 85.3% in April 2012 and achieved an availability of
92.8%.
Butibori: Steam blowing has been completed for unit 1 and the
company expects to synchronize the unit by the first week of
June. Work for the commissioning of unit 2 is progressing well
with the boiler hydro test having been completed. All key
auxiliaries for the plant have been commissioned as well. The
company will sell 147 MW from 1st unit to Reliance
Infrastructure’s Mumbai distribution business and the balance
to industrial consumers. The company is seeking to tie up the
second 300 MW unit with R Infra as well. The company has
sought a relaxation in the FSA rules to allow medium-term
PPAs as well as PPAs with open access consumers to be
considered for granting of FSAs.
2,400 MW Samalkot expansion project: The company has
synchronized 2 gas turbines (GTs) at the project and tested two
more GTs at Full Speed No Load (FSNL). The company hopes
to complete the combined cycle construction for two units by
year end. The company is in favor of pooling of domestic
natural gas and imported LNG for all customers and hopes the
proposal is implemented.
Sasan UMPP: The boiler hydro test has been completed for
unit 1 and the TG and ancillary erection is in progress for the
unit. Currently pressure part erection is being carried out for the
first three units and structure erection for the latter three. The
company is hopeful of commissioning the first unit by Dec 2012.
After that, the company expects to commission one unit every
quarter.
Chitrangi: All of the government land for the project is now
under possession and the private land awarded.
Environmental clearance has been received for the project and
site leveling work has been completed. The company is waiting
for forest clearance for the Chhatrasal coal block to be granted
before commencing construction work for the project. EGoM
approval for the diversion of excess coal from the Sasan UMPP
mines has already been received.
Krishnapatnam: The company perceives the change in
regulations in Indonesia on the pricing of coal as a force
majeure event. However. that has not been accepted by the
beneficiary states and hence the company has put the project
on hold pending a resolution of the impasse. As a next step, the
company hopes to go into arbitration with the beneficiary states
soon.
Tilaiya UMPP: The ownership of 186 acres of private land has
been transferred to the company. The company is awaiting
final approval for 167 acres of government land and the grant
of stage 2 forest clearance for 1,220 acres of forest land. The
company has completed the R&R survey for the power plant
area and has submitted its R&R plan to the district
administration. The decision on diversion of excess coal from
the mines attached to the project will now be made in
accordance with the policy on excess coal to be formulated by
the government.
Renewables: The company has commercialized a 40 MW
solar PV project in Rajasthan in March and expects generation
of 70 MU from the project annually. The panels for the project
were supplied by First Solar while L&T and R Infra EPC carried
out the construction activities. A 25 year PPA for the project
has been signed with the distribution arm of R Infra at a tariff of
Rs 17.91/unit. The company is also developing a 100 MW
concentrated solar power project in Rajasthan where the
offtaker will be NVVN at a tariff of Rs 11.97/unit. The equipment
for the project will be supplied by Areva and the construction
work is expected to start soon. The PPA will commence from
May 2013. A 200 MW wind project is also under development
at Vashpet. The first 45 MW at the project will be commissioned
by September 2012. This project too will sell to the distribution
business of Reliance Infrastructure at Rs 5.67/unit.
Captive Fuel: The company has 25 mtpa of captive coal
attached to the Sasan project and 40 mtpa for the Tilaiya
project. Besides this, the company will have 30 mtpa of coal
mining capacity in Indonesia and also has 8.5 mmscmd of CBM
blocks allocated. At the Moher and Moher Amhlori coal blocks
allocated to the Sasan UMPP, the company has assembled all
major equipment at the site and has already finished
overburden removal of 3.8 mcm. The company expects to
commence production from the mines in F2Q13. Production
ramp up from the mines will be in sync with the commissioning
of the Sasan UMPP. The Chhatrasal coal block, also attached
to the Sasan UMPP, is still awaiting forest clearance and the
company expects the same to be granted by the GoM soon.
For its Indonesian mining plans, the company has commenced
the process of land acquisition and acquired 261 acres of the
710 acres required. The company expects to begin production
from its mines in Indonesia by F2013 end. Initially coal would
need to be evacuated on barges up to a capacity of 7.5 mtpa.
The company will have to wait for the rail infrastructure to be
available at the site in about three years to increase the
capacity beyond 7.5 mtpa.
Capex: The company expects to incur capex of about Rs120
bn in F2013, which would be largely funded through debt.
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