Tata Power - Ideal Energy Acquisition to Fuel Growth :: Edelweiss

Please Share::

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

��

-->

Tata Power (TP) has signed an agreement to acquire 100% of Ideal Energy Project (IEP), which is currently implementing a coal-based 540MW plant (270MW commissioned in May 2013) in Maharashtra. The project has been idling due to lack of a long-term power purchase agreement (PPA) despite having coal linkage. While we await details on consideration to be paid for the deal and clarity on the transfer of linkage to the buyer, getting a long-term PPA holds key.

Event: TP has inked a share purchase agreement to acquire 100% of IEP, which is currently implementing a 540MW plant (270MW commissioned in May 2013) in Nagpur district, Maharashtra. While the total consideration for this transaction has not been disclosed, the acquisition will augment TP’s total generation capacity to 8885MW post certain statutory approvals and condition precedents.

Background: The 270MW coal-fired plant with 1.1mtpa linkage to be developed at a capex of INR15bn (equity of INR3.6bn with D/E of 75:25) has witnessed time overrun and consequently cost overrun of 20% to INR18bn. The project, which was commissioned in May 2013, has signed fuel supply agreements with Coal India subsidiaries post the Presidential directive. However, owing to lack of long-term PPA, which casts uncertainty around long-term domestic sourcing of coal, the plant has been shut ever since it commenced commercial operations in May 2013. Further, importing coal for the plant, which is located around 700km from the nearest port, for merchant sales will not be viable given the subdued merchant rates in the area. Current outstanding debt of ~INR15bn (promoter funding till date of ~INR6bn) with yearly interest outgo of ~INR1.7bn has been pressurising IEP, necessitating additional promoter support.

LINK
https://www.edelweiss.in/research/EdelFlash-Tata-Power--Ideal-Energy-Acquisition-to-Fuel-Growth/27800.html