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Adani Enterprises Ltd. — MoEF ok 15mt MDO
coal mine in ‘no-go’ – a key milestone
Company Update
Parsa Kante mine get stage-I MoEF nod but Parsa Stuck; Buy
To kick-start power capex and support SEB financials by offering cheap captive
coal based power, Minister for Environment made an exception by approving
ADE’s 15mtpa Parsa East and Kante Basan coal mine (PK Block - 2% of SOTP /
10% of coal mining value), which was in ‘no go’ zone for 18 months. ADE had
contract for PK block as a mine developer and operator (MDO - Exhibit 2). This
should kick-start ADE domestic mining business, a key scale & value driver.
However, the Minister has put Parsa block (5mtpa) in hibernation for 5 years, for
which also ADE has MDO contract. Buy ADE on estimated EPS CAGR of 50%
over FY11-13 and catalysts: 1) 3x scale-up in its IPP to 6.6GW by FY13E, 2) 1.9x
revenues at MSEZ on expected doubling of port traffic & pick-up in SEZ and 3)
execution of 200mtpa coal mining contracts, makes ADE one of the few large
coal plays in India.
Parsa East & Kente Basan – 1st domestic MDO set for launch
ADE has formed a JV, Parsa Kente Collieries Ltd (PKCL) with Rajasthan Rajya
Vidyut Utpadan (RRVUNL) to mine 15mtpa (ROM coal) Parsa East and Kente
Basan coal blocks at Korba, Chhatisgarh and deliver washed coal to RRVUNL
power stations in 2008. PKCL has subcontracted the mining to Adani Mining for
30 years. Production is likely to start from 4Q FY13E and reach peak in FY16E.
BHEL is already lowest bidder for 4x660MW EPC bids of RRVUNL. However, the
Minister didn’t allow mining for 5 years at ADE’s 3rd MDO contract to mine 5mtpa
at Parsa. Maintain PO as higher estimated valuation for PK Block was off-set by
cut in our Parsa estimated valuation.
Rs705 PO implies scale-up across verticals; execution key
Our PO represents 39% from coal businesses, 27% from Port & SEZ and 24%
from IPP. As ADE enters new areas to create scale, risk is execution as funding
risk has reduced post-QIP. However, we take comfort in its track record (6x
revenues over FY03-11), decent execution at Mundra Port and power plants, sale
of power, leadership in coal trade and promoters’ entrepreneurial acumen.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Adani Enterprises Ltd. — MoEF ok 15mt MDO
coal mine in ‘no-go’ – a key milestone
Company Update
Parsa Kante mine get stage-I MoEF nod but Parsa Stuck; Buy
To kick-start power capex and support SEB financials by offering cheap captive
coal based power, Minister for Environment made an exception by approving
ADE’s 15mtpa Parsa East and Kante Basan coal mine (PK Block - 2% of SOTP /
10% of coal mining value), which was in ‘no go’ zone for 18 months. ADE had
contract for PK block as a mine developer and operator (MDO - Exhibit 2). This
should kick-start ADE domestic mining business, a key scale & value driver.
However, the Minister has put Parsa block (5mtpa) in hibernation for 5 years, for
which also ADE has MDO contract. Buy ADE on estimated EPS CAGR of 50%
over FY11-13 and catalysts: 1) 3x scale-up in its IPP to 6.6GW by FY13E, 2) 1.9x
revenues at MSEZ on expected doubling of port traffic & pick-up in SEZ and 3)
execution of 200mtpa coal mining contracts, makes ADE one of the few large
coal plays in India.
Parsa East & Kente Basan – 1st domestic MDO set for launch
ADE has formed a JV, Parsa Kente Collieries Ltd (PKCL) with Rajasthan Rajya
Vidyut Utpadan (RRVUNL) to mine 15mtpa (ROM coal) Parsa East and Kente
Basan coal blocks at Korba, Chhatisgarh and deliver washed coal to RRVUNL
power stations in 2008. PKCL has subcontracted the mining to Adani Mining for
30 years. Production is likely to start from 4Q FY13E and reach peak in FY16E.
BHEL is already lowest bidder for 4x660MW EPC bids of RRVUNL. However, the
Minister didn’t allow mining for 5 years at ADE’s 3rd MDO contract to mine 5mtpa
at Parsa. Maintain PO as higher estimated valuation for PK Block was off-set by
cut in our Parsa estimated valuation.
Rs705 PO implies scale-up across verticals; execution key
Our PO represents 39% from coal businesses, 27% from Port & SEZ and 24%
from IPP. As ADE enters new areas to create scale, risk is execution as funding
risk has reduced post-QIP. However, we take comfort in its track record (6x
revenues over FY03-11), decent execution at Mundra Port and power plants, sale
of power, leadership in coal trade and promoters’ entrepreneurial acumen.
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