Adani Power's Q3FY20 results (Underperformer) - Merchant power portfolio increases to 3.7GW
Q3FY20 results highlights:
- APL acquired Raikheda and Korba power plants in July 2019 and August 2019. Korba commercial operation has restarted from December 2019 while Raikheda PLF operated at a PLF of 55% in Q3FY20. Note that Raikheda power plant short term PPA has expired in December 2019.
- PLF of the key power plants in Q3FY20: a) Mundra PLF was 75% (vs 64%) b) Tiroda TPS PLF was 74% (vs 86%) c) Kawai TPS PLF was 75% (vs 69%) d) Udupi TPS was 21% (vs 63%). Overall, the power plants reported a PLF of 68% (vs 73%) owing to sharp decline in Udupi PLF. Overall generation grew by 5% yoy to 17.8U (due to acquisition of Raikheda power plant)
- Consolidated revenue grew by 3% yoy to Rs66bn in Q3FY20. EBITDA was Rs14.2bn (vs our est. of Rs19bn), a growth of 32% yoy led by increase in tariff under Gujarat PPA from April 2019. As a result, adjusted loss for the quarter was Rs7.2bn.
- APL has achieved financial closure for its 1,600 MW Godda project of APJL (Adani Power Jharkhand Ltd). The power plant is expected to commission by FY23E.
- APL has raised compensatory tariff claims of Rs237bn 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. The management expects the balance amount of Rs185bn to be liquidated over next six quarters post final judgements.
Key positives: Commercial Operation of 600MW Korba Power plant.
Key negatives: Open capacity of 3.7GW – Raikheda (1.4GW), Korba (0.6GW) and Mundra (1.8GW)
Impact on financials: Maintain our FY20E/FY21E estimates; introduce our FY22E estimates.
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.
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