Adani Power - Shirking Negatives, Trims Losses; Result Update Q3FY15 ::Edelweiss

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Adani Power’s (APL) Q3FY15 INR4.3bn consolidated loss was much lower than our INR6.7bn loss estimate. Losses decreased mainly on higher compensatory tariffs (CT) across PPAs and improved availability of cheaper linkage coal for Tirora and Kawai plants. Consolidated PLFs at 78% improved following demand and coal supplies. Anticipating favourable final compensatory orders, improved coal supplies and loan refinancing under 5/25 scheme management is confident of improving earnings going ahead.

Losses reduce on improved operational performance

APL witnessed a sharp jump in consolidated PLF to 78% (versus 60% in Q2FY15), leading to net generation of 14.7BU (10.5BU in Q2FY15) in line with our estimate. Revenue surpassed expectations on higher-than-estimated CT of INR5.7bn (INR2.6bn for Mundra, INR2.5bn for Tirora and INR550mn for Kawai) booked during the quarter. This coupled with 80% materialisation of contracted coal quantity from Coal India (for both Mundra and Tirora projects) as well as lower coal costs in Tirora and Kawai plants (~INR2/kwh against INR2.2/kwh estimates) thereby trimming the loss to INR4.3bn versus estimated INR6.75bn. Merchant sale of 1.4BU (entirely from Mundra) was at INR4.16/kwh during the quarter. Additionally, APL received approval for selling its transmission business, to parent company (AEL) and reducing debt by ~INR41bn.

Focus on inorganic growth continues

Due diligence (DD) for Lanco’s Udupi 1,200MW is yet to be completed for which the Dec’14 deadline has been extended. Further, the company has entered into an agreement to buy the Korba West 600MW plant from Avantha group for which DD is in progress. Given leveraged balance sheet initial funding for acquiring these assets will be from the promoter company.

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https://www.edelweiss.in/research/Adani-Power--Shirking-Negatives,-Trims-Losses;-Result-Update-Q3FY15/10005508.html