Adani Power's Q3FY19 results (Underperformer) - Regulator to conclude hearing on Mundra PPA
Q3FY19 results
- PLF of the power plants in Q3FY19 were: a) Mundra PLF was 65% (+390 bps yoy) b) Tiroda TPS was 86% (+2514bps yoy) c) Kawai TPS was 81.5% (3877 bps yoy) d) Udupi TPS was 62% (+774 bps yoy). Adani Power availability under Gujarat PPA’s has improved to 100% in December 2018.
- APL reported adjusted EBITDA of Rs11bn (vs estimate of Rs14bn), a growth of 49% yoy. APL adjusted losses came in at Rs10bn (vs estimate of loss of Rs4bn) in Q3FY19.
- Note that Gujarat PPA – I and II has been amended by the DISCOM and Adani Power. Amended PPA allows for a) pass through of coal price b) reduction in capacity charge by Rs0.20/unit c) extension of PPA by another 10 years d) additional tie up of 432MW
- Post the Supreme Court direction to CERC to examine the amended PPA, CERC has almost concluded the hearings. We expect order on the amended PPA’s to be in place by March 2019. Unless it is mired in further appeals, we estimate amended PPA to provide huge relief to the cash flows.
- Supreme Court had directed Rajasthan DISCOMs to pay 50% of the claim of Rs55bn made by Adani Power for supply of power from Kawai power plant. Against the total claim, Rajasthan DISCOMs have made the payment of Rs23bn during the quarter.
Key positives: Expeditious hearing of Mundra amended PPA in CERC; Payment of Rs10bn and Rs22bn against Tiroda and Kawai PPA
Impact on financials: We increase our loss est. for FY19E to Rs23bn to account for high losses during quarter; introduce FY21E losses at Rs7bn
Valuations & view
We believe Supreme Court direction to CERC for amendment of PPA’s is positive but may be prone to a protracted litigation. As a result, Mundra will continue to make cash losses. We estimate SHAKTI auction to reduce coal cost but will not be sufficient enough to offset the losses at Mundra. As a result, we estimate APL’s total losses at Rs13bn/Rs7bn in FY20/FY21E. We believe some form of equity infusion in the company over the next 12 months will help the company to reduce the gearing. We reiterate underperformer with a target price of Rs24/share
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.
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