Adani Power's Q4FY19 results (Neutral) - Mundra performance improves on positive order
Q4FY19 results
- PLF of the power plants in Q4FY19 were: a) Mundra PLF was 83% (+6019 bps yoy) b) Tiroda TPS was 84.7% (+2817 bps yoy) c) Kawai TPS was 76.4% (+6269 bps yoy) d) Udupi TPS was 47% (-1958bpss yoy). Mundra Power plant PLF has improved with the supplementary amendment of PPA.
- CERC has approved the amendment in PPA in April 2019. As a result, APL has recognised Rs7.1bn for the period from Oct 2018 to March 2019 during Q4FY19.
- Note that supply to Gujarat has commence under the amended PPA’s to the extent of 2434MW (from earlier 2000MW)
- During the quarter, APL also reversed the compensatory tariff booked against de-allocation of Lohara Coal block of Rs12.6bn pending final judgement.
- Adjusting for prior period items, APL reported EBITDA of Rs16bn (vs estimate of Rs17bn), an increase of 115% yoy led by higher generation in power plants. The miss in estimate was due to compensatory tariff not being booked for Lohara. Adjusted PBT for the quarter was a loss of Rs1.2bn. FY19 EBITDA and adjusted losses were Rs49bn and Rs10bn.
Key positives: CERC +ve order on amendment of Mundra PPA; additional 434MW tied up under long term PPA; conversion of intercorporate loan of Rs80bn to unsecured perpetual securities.
Key negatives: Reversal of compensatory tariff booked against de-allocation of Lohara coal block.
Impact on financials: We increase our loss est. for FY20E/FY21E to Rs6bn/Rs4bn to account for Lohara Coal block.
Valuations & view
APL under recovery for Mundra PPAs is expected to reduce sharply. 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 Rs44/share (valuing all finalised claims at 100% and other claims at appropriate discounts). We maintain our Neutral 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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