Event update: Adani Power (Neutral) - Relief for shortage of domestic coal for Tiroda
Event Update
Adani Power (APL) has received a favourable judgment from the regulator for relief against shortage of domestic coal for Tiroda PPA’s.
Details of the case
- APL had set up a 3.3GW (5 x 660MW) power plant at Tiroda. APL had signed four power purchase agreements (PPA) with the Maharashtra state utility. APL had domestic coal linkage for 1.2GW for units 1 &2; units 3, 4 and 5 had tapering linkage and an MOU with Coal India. APL approached MERC for relief against shortage of domestic coal.
- MERC, the state regulator had earlier decided to grant compensation for shortage of domestic coal supply by Coal India. Post the judgement of Supreme Court, APTEL directed the regulator to hear the matter afresh.
Summary of the judgement
- Regulator has decided to compensate APL for shortage of domestic coal till March 2017. APL is entitled for compensation for shortage of domestic coal and the difference between linkage price and actual price paid under MOU/ eauction/import.
- Note that the total amount claimed by company is Rs13bn against the shortage of supply of domestic coal. We believe a large amount of this claim will get realised. Moreover, company has also filed a separate petition for compensation against de allocation of Coal block (claim of Rs13bn). The total compensation claimed at the end of March 2017 was Rs52bn – Rs6bn for Mundra Haryana PPA , Rs13bn for Tiroda PPA against coal block, Rs13bn for Tiroda PPA against shortage of coal and Rs20bn for Kawai PPA.
Valuations & view
APL has received a major relief with the order as it is likely to get similar relief for its claims in Kawai, Tiroda (de allocation of coal block) and Haryana PPA’s. Moreover, the company has won coal linkage for its capacity which was not tied up under long term fuel supply agreements obviating the need for any compensation going forward. Maintain our Neutral rating as we await more clarity on Mundra/Gujarat power purchase agreements.
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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