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MOSL: NTPC (Buy)-Kudgi and Solapur projects on track-Earnings growth to accelerate-valuations attractive

​NTPC: Kudgi and Solapur projects on track; Earnings growth to accelerate; valuations attractive

(NTPC IN, Mkt Cap USD22.0b, CMP INR173, TP INR204, 18% Upside, Buy)

We visited two of NTPCsa’s (NTPC standalone) major greenfield sites at Solapur and Kudgi, which will add INR73.6b or 17% to regulated equity. Our key takeaways:

Kudgi (3 x 800MW = 2,400MW): On track for full CoD in FY18

• The project faced two major hurdles – land acquisition for approach rail line and delays in coal handling plant due to financial stress of vendor. NTPC overcame the first by building a viaduct (Exhibit 3) and the second by dealing directly with the sub-vendors.
• The project sources water from the Almatti dam, which is 43km away. There is no shortage of water, as the dam has sufficient water.
• The first unit of 800MW (Unit-1), which began commercial generation on July 31, 2017 (commercial operational date; CoD), was operating at 511MW (Exhibit 1). Though the ECR (energy charge rate) is ~INR3/kwh, it is getting scheduled in the merit order. Coal is being sourced from SCCL under bridge linkages.
• Unit-2 was commissioned on March 23, 2017. It has also achieved full load, but CoD is pending due to delay in ramping up coal supply. CoD is planned in September 2017.
• Unit-3 is in the final stages of commissioning (Exhibit 2). The commissioning and CoD is expected by December 2017. While this unit may be commissioned by December, the CoD may spill over into FY19.