Adani Power's Q2FY20 results (Underperformer) - Acquisition of power plants; APTEL allows complete recovery in Kawai
Q2FY20 results
- PLF of the key power plants has improved considerably : a) Mundra PLF was 73% (vs 71% in Q2FY19) and PAF of 84%) b) Tiroda TPS PLF was 71% (vs 63% in Q2FY19) and PAF of 78% c) Kawai TPS PLF was 57% (vs 68% in Q2FY19) d) Udupi TPS was 11% (vs 25% in Q2FY19) and PAF was 75%. However, lower PLF at Kawai and Udipi plant has resulted in generation decline by 5% to 13.8BU.
- APL reported EBITDA of Rs12bn (vs estimate of Rs18bn), +2.5% yoy led by lower generation and merchant sale of Mundra PPA 2 capacity. As a result, adjusted loss for the quarter was Rs8.6bn (est of loss of Rs855m). Profit has been adjusted for claims of Rs8.6bn pursuant to APTEL order allowing complete compensatory tariff (CT) in Kawai for shortage of domestic coal including carrying cost.
- During the quarter, it acquired two power plants – GMR Chhattisgarh (1370MW) and Korba West Power (600MW). Total enterprise value for GMR and Korba West was Rs35bn and Rs11bn (through NCLT).
- APL has stopped supplying power from PPA-2 (1234MW) to Gujarat and is selling power in open market from 1320MW (phase 3) power plant during Q2FY20. CERC is in process of determining the compensation for the company for supplying power from imported coal from period June 2010 to Aug 2019 (estimate >Rs50bn).
- APL has booked CT of Rs100bn till date - received Rs50bn. Additionally, it has strong case for compensation of Rs100-120bn in 2 cases a) Mundra- Gujarat Bid 2 PPA and b) Tiroda – Lohara Coal case
Key positives: Completion of acquisition of GMR and Korba power plant; APTEL order to Rajasthan DISCOM to make payment in 2 months
Key negatives: Loss of Rs1.7bn from the newly acquired power plants
Impact on financials: Increase in loss estimates to Rs10bn in FY20E
Valuations & view
APL under recovery for Mundra PPA -1 has reduced sharply. In addition, Supreme Court has terminated PPA-2 which will pave the way for a >Rs50bn compensation. Further, APL has various claims for Tiroda and Kawai, which are being heard by various regulatory/appellate bodies. Favourable judgement from these claims will help the company further reduce debt and cut losses (not in our profit estimates). We value APL at a target price of Rs48/share (include claim arising from Supreme Court order; valuing all finalised claims at 100% and other claims at appropriate discounts). We maintain our Underperformer rating considering expensive valuations, high debt and risk of further litigation.
Adani Power Limited is a holding company. The Company is engaged in providing electric power generation by coal-based thermal power plants and coal trading. Its business activity is undertaken at Mundra Thermal Power Plant of the Company in Gujarat and Thermal Power Plant of its subsidiaries at Tiroda (Maharashtra), at Kawai (Rajasthan) and at Udupi (Karnataka). It has approximately five power projects. The Company operates an aggregate of approximately 10,480 megawatts generation capacity comprising of over 4,620 megawatts at Mundra; approximately 3,300 megawatts at Tiroda; over 1,320 megawatts at Kawai; approximately 1,200 megawatts at Udupi, and over 40 megawatts (solar) at Kutch, Gujarat. It focuses to sell the power generated from these projects under a combination of long term Power Purchase Agreements and on merchant basis. Its subsidiaries include Adani Power Maharashtra Limited, Adani Power Rajasthan Limited, Udupi Power Corporation Limited and Adani Power Resources Limited.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.