Jaiprakash Power Ventures' Q3FY18 results (Underperformer) - Awaiting lenders stake sale
Q3FY18 result highlights
- Bina TPS operated at a PLF of 52.7% (vs 37.2% in Q3FY17) while PAF was 79% in Q3FY18 (vs 100% in Q3FY17- for 65% of capacity tied in cost plus PPA). Nigrie TPS generated 2.2BU in Q3FY18 (PLF of 73% in Q3FY18 vs PLF of 59% in Q3FY17). JPVL has sold most of the Nigrie capacity on merchant basis during the quarter. We note that Nigrie has 38% capacity tied up under cost plus PPA.
- EBITDA came in at Rs1.8bn for Q3FY18 (above est. of Rs1.5bn). Other income during the quarter came in at Rs1.1bn as Rs0.7bn of deferred consideration for Karcham Wangtoo was received during Q3FY18. As a result, loss after tax was Rs2bn (est. of loss of Rs1.5bn). Under recovery of energy charge for Nigrie TPS (especially under long term PPA with MP DISCOM continues to impact profit adversely.
- Interest cost in the quarter reduced to Rs3.9bn, including Rs143m charge on unwinding of hedge related to ECB (vs Rs4.6bn in Q2FY18). The decline in interest cost was due to strategic debt restructuring scheme implemented by lenders of JPVL to reduce the corporate debt burden. The corporate debt of Rs30.6bn was converted into 3058m equity shares in Feb 2017 resulting in 51% stake for lenders in JPVL
- Bara TPS, 1980MW operating under subsidiary, operated at a low PLF of 37% in 9mFY18. Unit 3 of 660MW was commercialised during Q1FY18. During the quarter, lenders have invoked pledge into the subsidiary to convert debt into equity.
Key positives: Conversion of debt into equity in subsidiary
Key negatives: Low PLF at Bara of 37%
Impact on financials: We maintain our estimates for FY18E/FY19E/FY20E
Valuations & view
We believe conversion of Rs30.6bn corporate debt into equity in the standalone entity and proposed conversion of debt into equity of Prayagraj Power, a subsidiary, will bring significant financial relief to JPVL. However, JPVL will continue to make losses on account of lack of PPA for 62% of capacity at Nigrie and 38% of capacity at Bina Power plant. Successful stake sale, structuring of debt and improvement in PLF's of Bina and Nigrie can bring a sustainable turn around in the company. We maintain underperformer, with a TP of Rs3
Jindal Steel & Power is engaged in the manufacture of rails, parallel flange beams and columns, plates and coils, angles and columns, rebars, wire rods, fabricated secions, speedfloor, semi-finished products, power, minerals and sponge iron.
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