Jaiprakash Power Ventures' Q4FY18 results (Underperformer) - No resolution yet
Q4FY18 result highlights
- Bina TPS operated at a PLF of 43.5%/66.4% in Q4FY18/FY18 while PAF was 83.4% in FY18 (vs 88% in FY17 - for 65% of capacity tied in cost plus PPA). Nigrie TPS generated 1.2BU/7.7BU in Q4FY18/FY18 (PLF of 66% in FY18 vs PLF of 63% in FY17). JPVL has sold most of the Nigrie capacity on merchant basis in FY18. We note that Nigrie has 38% capacity tied up under cost plus PPA.
- EBITDA came in at Rs2.1bn/Rs10.4bn for Q4FY18 (above est. of Rs1.9bn)/FY18. As a result, adjusted loss after tax was Rs1.6bn (est. of loss of Rs1.7bn)/Rs4.4bn in Q4FY18/FY18. Under recovery of energy charge for Nigrie TPS (especially under long term PPA with MP DISCOM continues to impact profit adversely.
- Interest cost Q4FY18/FY18 reduced to Rs3.5bn, 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 equity shares resulting in 51% stake for lenders in JPVL
- However, lenders were not able to divest their equity stake (as per SDR) as lenders could not find suitable bidders. Currently, the lenders are considering a resolution plan according to latest RBI guidelines.
- Adj. consolidated FY18 loss is Rs13bn due to losses at Bara TPS, operating under subsidiary. Bara TPS is not being consolidated post December 2017 as lenders invoked pledge and are running the power plant.
Key negatives: Delay in resolution
Impact on financials: We increases our loss estimate to Rs4bn/Rs4bn for FY19E/FY20E to account for untied capacity of power plants
Valuations & view
We believe conversion of Rs30.6bn corporate debt into equity in the standalone entity has brought relief to JPVL. However, JPVL will continue to make losses on account of lack of PPA for 65% of capacity at Nigrie and 35% 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
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