UBS: NTPC: Management meeting takeaways

NTPC: Management meeting takeaways

􀂄 We met with NTPC management on 29 September 2010
We met with NTPC management yesterday. The key takeaways are: 1) the
execution and actual capacity commissioning is likely to pick up in FY11/12; 2)
the company intends to sign long-term power purchase agreements (PPAs) for
another 25,000MW before December and overall, it may have ~75,000MW under
regulated return by FY16/17; and 3) coal production from Pakri Barwadi mines
will commence from FY12.
􀂄 Bulk tendering for 7,260MW to be completed in FY11
NTPC is confident that the 11*660MW BTG equipment bulk tendering will be
completed in H2 FY11. The company has already started work on Phase 2 of bulk
tendering (nine units of 800MW each), and expects these sets to be ordered out in
FY12. We believe this would be a positive for domestic BTG equipment
manufacturers.
􀂄 NTPC is prepared for post-regulated return regime scenario
NTPC says it is fully prepared for the post regulated return regime scenario that
becomes effective January 2011. However, even for its competitive bids, NTPC
would continue with returns that are closer to regulated return. NTPC adds that
there is a view among some state electricity boards (SEBs) that the complete shift
to competitive bidding post January 2011 may lead to cartelisation among private
developers. This concern may lead to an extension of this deadline by the central
government.
􀂄 Valuation: maintain Neutral rating
We retain our DCF-based price target of Rs230. We view NTPC as a good
defensive stock.