Tata Power to invest Rs 1,000 Cr to lay cables in Mumbai…

 Tata Power, India's largest private power generation company is planning to lay its own distribution cable network in the Mumbai with the investment of  around Rs 1,000 crore over the next three years.

Currently, Tata Power serves around 8 lakh consumers using the distribution netwok of BEST and Reliance Infrastructure. For this, Tata Power is charged wheeling charges by Reliance Infrastructure and BEST which it has to recover from its consumers.

 

Earlier, Tata Power was not allowed to lay parallel network in the Distribution area of Reliance Infrastructure, however after the Supreme Court order they are allowed for the same. Tata Power has put up a proposal to the MERC for laying down the network.

Meanwhile, Spark found that in a recent order of the MERC, the regulator had granted Reliance Infrastructure the license to distribute electricity in the suburbs for 25 years as the company's license was expiring on August 15.

The MERC had rejected the proposals of four other bidders, including Torrent Power, Lanco Infrastructure, MSEDCL and Indiabulls, saying they did not have their own networks in place and in "public interest" it granted Reliance Infrastructure the license.

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Spark’s Update on Reliance Power…

 Reliance Power is in a better position than peers to generate cheaper power, because of high captive coal reserves, lesser logistics expense due to proximity of mines to plants and low-cost debt financing.

• The company has one of the highest captive coal reserves - 65 million tonne at peak production - most of which has got environment clearances.
• Most power plants are close to captive mines, thus lowering cost of logistics.
• Also, the company has raised debt at a much lower rate than industry average.

These factors would enable Reliance Power to produce power at cheaper rates, lowering offtake risk from financially weak state electricity boards.

 
The company, which has 600 MW operational power plant at Rosa in UP, is operating at a high capacity utilization when peers are struggling due to lack of fuel supply and buyers.
For the quarter ended June, Reliance Power, a part of the ADAG, reported a 15% rise in sales, 28% in operating profit and 51% in net profit. Plant load factor, or capacity utilisation, was 91% and plant availability factor, or plants available for production, was 94%, much higher than industry average.

The company is also in a better position with regards to its Indonesian coal mines. Due to Indonesia's tax levy, coal-linked projects of companies such as Reliance Power (Krishnapattam project), Tata Power,

Adani Power would become less profitable. As the Krishnapattam project is in early stages, Reliance Power has stalled all its construction activity for which it will have to pay a penalty of 300 crore, which is less than 2% of the total project cost. If the company doesn't go ahead with this project, it would still be able to sell coal from its Indonesian mines, which is very unlikely for others as they are in advanced stage of project development. Indonesia is among India's largest coal suppliers.

Timely commissioning of its upcoming projects can rerate the stock. The company aims to expand capacity to 5,000 MW by December, 2012 from 600 MW and its plans are on track. At the current market price of 84, Reliance Power's scrip trades at a valuation little higher than its peers and this premium is justified.

Stock prices of Reliance Power on August 25, 2011. (Courtesy Economictimes.com)

 

BSE

82.75

-00.78%

-00.65

Vol:501252 shares traded

NSE

82.80

-00.48%

-00.40

Vol:1567353 shares traded

 

 

 

 

 

 

 

 

Prices|Financials|Company Info|Reports

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Jharkhand State PCB shuts 22 mines of Coal India…

According to news, The Jharkhand State Pollution Control Board has ordered shutting down 22 open-cast mines of Coal India world’s largest miner.

A subsdiary of Coal India, called Bharat Coking Coal Ltd (BCCL), is having around 22 open cast mines in Jharia in Dhanbad District, Jharkhand. The output of these mines account for a 20% of output of Bharat Coking.

Spark learnt that on August 24, the Jharkhand State Pollution Control Board has order to shut down these mines and ordered the company to get mandatory clearances from the Union ministry of forests and environment.

 

As per some unofficial sources, Coal India reportedly failed to respond to a show-cause notice issued to it by the Jharkhand body.

Spark estimates that the closure of 22 out of Bharat Coking’s 103 mines can bring down production by about 35,000-40,000 tonne a day.

Out of Coal India’s 2010-11 production of 424.50 million tonne, Bharat Coking contributed 29.29 million tonne, the only subsidiary among its eight arms to exceed target.

 

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Essar Power to terminate 800 MW PPA with GUVNL…

Spark learnt from the reports that the Essar Power Limited has issued one week notice for terminating its PPA singed with GUVNL for supplying 800 MW of Power for next 25 years.

Essar Power has earlier signed a PPA with Gujarat Government for supplying 800 MW for Power for next 25 years at the tariff of Rs. 2.80 per unit. However, it seems that currently Essar Power does not want to continue with the arrangement and has issued a one week termination notice to GUVNL.

 

As per the Essar Power statement,  "This (PPA termination) decision follows the failure by GUVNL to satisfy certain conditions under the PPA within the required timescale."

However, as per the Spark’s analysis, the increasing imported coal prices have made many power projects (including Essar’s) unviable. Essar Power is commissioning 1320 MW of imported coal based project at Salaya in Saurashtra region of Gujarat.

Meanwhile, Essar Power stated that the company remains committed to the Salaya power project and will be reviewing its options with regard to power sales. Proposed project is currently scheduled to commission in Q1 2014.

 

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Adani Power to raise $1.8b abroad by September…

According to the Market Buzz, Gujarat based Power major Adani Power is on the verge of raising foreign currency funds of USD 1.8 Billions (Rs. 8232 Crs) by September 2011 .  

This move of Adani Power is quite significant considering the present time when most firms in India face difficulties in raising funds abroad due to unfavorable economic conditions and tight liquidity. Further, the move to take loans from abroad comes at a time when Indian banks have reached the limit of exposure to power sector debt and are wary of the credit risk involved in power projects that use imported coal, besides a fall in merchant power tariffs that could upset revenue and profit projections of power producers.

As per the sources, the loan of around USD $800 million (Rs 3,658.70 crore) has been raised at interest rate of 350-360 basis points above Libor.

 

Spark believes that the funds would be used to finance the Mun­dra Power Project and part-finance the Adani Power’s Maharashtra project where the company is implementing a 1,980 mw thermal power project in Tiroda.

The 4,620 mw project in Mundra is on track and the company has already commissioned 2,640 megawatts, including four units of 330 mw each and two units of 660 mw each with supercritical technology. The remaining 1,980 mw is under construction and is expected to be operational by the end of this financial year. The company also plans to synchronise two more units of 660 mw each, based on supercritical technology, at Tiroda this year.

According to Spark, Adani Power is comfortably placed of achieving about 6,000 mw operational capacity in 2011-12 out of the total planned capacity of 16,500 mw that is under development across Gujarat and Maharashtra.

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