September 2012
monthly round-up of power utilities
mPower
In this edition
Special
Report
(page 2)
Statistical
Review
August-12
(page 5)
July-12
CAG Report on Captive coal block:
Negligence of MoC
Power Generated
PLF
Short Term Prices
73BUs (up 2% YoY)
57.9% (down 353bp YoY)
Avg prices muted at INR2.5/unit,
led by uptick in monsoon
Capacity Addition
July-12 addition at ~1GW
(Excl RES)
(achieved ~34% of FY13 target)
Base Deficit
9.1% (down 407bp YoY)
Peak Deficit
8.1% (down 180bp YoY)
Company/
Forward Curve (July-12):
Maintained at INR4/unit+,
Industry
Re-iterate our positive stance on JSW Energy
Analysis
CERC MMC Report (June-12):
ST Power volume record 2-digit
(page 12) growth, prices firming up; Punjab/UP remains leading procurer
Update Coal India:
Challenges being addressed, operating
performance strong
Results Update:
1) Coal India (in-line) 2) NHPC (above estimate)
3) Tata Power (below estimate) 4) Rinfra (above estimate) 5)
PTC (above estimate)
News and
Government moots compulsory 25-year power purchase
Events
pacts for new projects
(page 21)
Govt has ruled out blanket de-allocation of coal blocks
Valuation
The power sector has seen significant valuation de-rating due
(page 24) to concerns over delayed capacity additions, merchant prices,
lower demand and fuel supply issues. We are positive about
companies that are relatively better positioned on these fronts.
Our top picks in the sector are
NTPC, Powergrid
and
JSW Energy.
Comparative valuations
Recom Mkt Cap
(INR b)
CPSUs
NTPC
PGCIL
Coal India *
NHPC
Private Sector
Tata Power
Adani Power
JSW Energy
Lanco Infra
Reliance Infra
CESC
PTC
* RoE Adjusted
Buy
Buy
Buy
Neutral
1,390
568
2,263
216
CMP
(INR)
169
123
358
18
AT A GLANCE
ST Price: Aug Avg at INR2.5/unit
(INR/unit)
Base Deficit (July12): Stood at 9.1%
EPS (INR)
EPS Gr. (%)
RoE (%)
P/BV (x)
P/E (x)
EV/EBITDA (x)
FY13E FY14E FY13E FY14E FY13E FY14E FY13E FY14E FY13E FY14E FY13E FY14E
11.7
8.6
28.3
1.9
5.5
2.2
3.8
1.1
44.2
47.5
7.4
14
10
30
2
4
4
6
2
49
53
9.4
16
19
11
-5
-27
-615
88
302
-42
8
7
20
20
7
8
-25
79
68
85
10
12
26
13
16
28
8
8
8
11
15
6
12
4
14
17
25
8
7
12
16
12
7
12
6
1.8
2.2
4.4
0.7
1.9
1.4
1.2
0.5
0.6
0.7
0.7
1.6
1.9
3.6
0.7
1.8
1.2
1.1
0.5
0.6
0.6
0.7
14
14
13
9
18
19
12
10
10
6
17
12
12
12
8
24
11
7
5
9
6
12
11.1
10.5
8.4
7.6
9.2
9.5
7.4
7.1
Neutral
233
98
Neutral
91
42
Buy
75
46
Buy
26
11
Buy
119
445
Buy
38
299
Buy
16
55
for OB reserves provisions
17.1 15.7
0.3
0.0
7.3
5.5
9.2
9.1
1.8
1.0
4.8
4.5
7.4
5.9
Source: MOSL
1
Nalin Bhatt
(NalinBhatt@MotilalOswal.com) +91 22 3982 5429
Satyam Agarwal
(AgarwalS@MotilalOswal.com) /
Vishal Periwal
(Vishal.Periwal@MotilalOswal.com)
Investors are advised to refer through disclosures made at the end of the Research Report.

mPower
Special Report
Special Report
CAG report on Captive coal block: Negligence of MoC
"Objectivity, transparency and benefit to consumer is key focus area
A] Objective of the report and way forward
Imports are increasing, power capacity is idling or operating at low rates, while
contribution envisaged owing to captive coal block allocation has been a clear let
down.
"Selection process" for allocation of coal blocks on captive mines have been raised
in parliament and some allocation are also being "contested" in different courts
in the country. While the initiative of coal block allocation on competitive bidding
was first taken up in 2004, the framework of the same was not decided till February
2012 (MoC declared framework for coal block auction on 2nd February 2012) and
thus, coal block allocation continued under "captive dispensation" route.
Audit objective is to ensure "objectivity" and "transparency" in the coal block
allocation and that the benefit of low coal cost is be passed on to the consumer.
Audit report submitted by CAG would be considered "final" once it is examined by
Parliament's Public Accounts Committee (PAC), constituted by leaders from several
political parties, for the auditing of the expenditure of the Government of India.
Currently, PAC is headed by Dr. Murli Manohar Joshi, a senior leader from Bhartiya
Janata Party (BJP). Chairman is appointed by the Speaker of Lok Sabha and chief
function of PAC is to examine the audit report of CAG after it is laid in the Parliament.
PAC is also working on 2G scam and had summoned to the various parties purported
to have benefited from the same last year, including eminent corporate leaders.
Thus, we would have to await clarification on the further course of action.
Under
this, even CAG would be enquired on several claims/observation and if approved,
it would be forwarded to parliament for further debate/action.
B] Process of allocation of coal block was opaque, screening committee
had no objective assessment in place
In July 1992, MoC constituted "screening committee" but there was "no" clearly
spelt out criterion for allocation of mine and allotment was made to the applicant
who had produced only a letter of recommendation from the State government.
Minutes of screening committee meetings or any other document do not provide
any comparative evaluation of allottee for a particular captive block.
GoI constituted an expert committee (Dec 2005) headed by Mr. T L Shankar to
provide comprehensive roadmap to modernization of coal sector. Key
recommendation include specifying procedure for allocation of mines such that
it is transparent, excess production from captive mine to be sold to CIL/SCCL at
negotiated price, setting up a permanent special task force to monitor progress of
captive mines, etc. The recommendation were not affected in spirit.
September 2012
2

mPower
C] MoC could have resorted to coal block auction in 2006, but persisted
with "old system"; loss to ex-chequer at INR 185,591cr
Government had decided to bring in the objectivity and transparency in the
allocation process with 28th June 2004 as cut-off date (prospective). Given the
lack of clarity on the framework (whether it is an administrative change or
amendment under the act is needed) under then prevailing Coal Mine
(Nationalization) Act, Mines and Minerals (Regulations and Development) Act,
1957 and Mineral Concession Rules, 1960, the view of Department of Legal Affairs
(DLA) was sought. DLA had in its report given in July 2006 made clear that the
decision on the course to be adopted was a matter of policy of Ministry of Coal
(MoC) itself. The same view was further vindicated in additional clarification sought
by MoC in August 2006. CAG is thus of the view that competitive bidding could
have been introduced since 2006 itself and thus, loss could have been arrested
through suitable framework.
Despite such a directive, the MoC took a "final" view that this calls for an
amendment to MMDR Act only by 2nd February, 2012 and continued to award coal
blocks under the earlier framework.
Between the period from 2004 to 2006, 71 more blocks were allotted by MoC, vs
only 39 blocks before 2004.
Total of 75 private sector allottees were given captive
coal block. CAG has calculated the loss to ex-chequer excluding the UG mines (18
allottees) given lack of reliable data for cost/value of coal and UMPPs (12 coal
blocks), as also blocks allotted jointly with PSUs.
Given this, 57 allottees were
given OC/mixed mines with 6.3b tons, where loss to ex-chequer is estimated
INR185,591cr.
Working takes into account FSA realization of Coal India for various
grade, less cost of production for an open cast mine, and cost of interest.
CAG concludes its section on captive coal block allocation as
"CAG is of strong
opinion that there is a need for strict regulatory and monitoring mechanism to
ensure that the benefit of cheaper coal is passed on to the consumers".
D] Performance of captive coal block is poor - negligence on monitoring/
administration by MoC
Total of 194 coal blocks (net off de-allocation of 24 blocks, gross allocation was 216
blocks) are allotted as at March 2011 with reserves of 44b tons. Out of 86 coal
blocks with target production of 73m tons in FY11, only 28 blocks started production
producing only 34m tons.
Taking cognizance of such delays, MoC
later
embarked on an exercise to review
the performance of coal blocks and de-allocated 24 coal blocks as at today. MoC
has in its defense put out that allottees who have not yet started the production
are in various stages of obtaining clearances and timeline for obtaining clearance
have been higher. To illustrate, the 24 months time given for exploration and 6
months for obtaining forest clearance are not found adequate and Coal India
takes more than 4 year for getting environment and forest clearance.
CAG does
not agree with MoC on how can these slippage be legitimate, given that production
was envisaged taking sufficient time from pre-mining activity stage to production
stage.
September 2012
3

mPower
Other lapses highlighted by CAG are:
1. Failure to increase drilling capacity for CMPDIL (Central Mine Planning & Design
Institute Limited) to only 3.44 lakh meter pa, vs expert committee
recommendation of 15 lakh meter pa.
2. Several of Coal India's de-allocated blocks (against Expert committee
recommendation) were given to other private parties, which has not been in
production, while balance few remains to be awarded. Amongst these, Coal
India had specifically asked/requested to not de-allocate few coal blocks,
where it had begin the development work.
3. Request by Coal India to allocate 138 coal blocks (originally in August 2008)
with reserve of 57.6b tons, which was later revised to 116 blocks (September
2011) with 50b tons is still awaiting approval from MoC.
4. CCO was responsible for monitoring the development of captive coal blocks.
CCO did not conduct any physical inspection of allotted coal blocks, due to
lack of staff strength. It is to be noted that 17 technical posts proposed by CCO
in 2007 was still under consideration by MoC. Lastly, CCO monitoring committee
was to review the progress of block on monthly basis, which was not strictly
followed and reviews were done only on quarterly basis.
5. Discrepancy in Bank Guarantee for performance of captive block development
/end use project and accounting of the same.
Key recommendations
1. In order to bring 'objectivity' and 'transparency' in the allocation and for tapping
of a part of benefit accruing to the allotteess of captive coal blocks, MOC should
urgently work out the modalities to implement the procedure of allocation of
coal blocks for captive mining through competitive bidding (already specified
now, highlighted below).
2. MOC should evolve a system of giving 'incentives' to encourage production
performance from captive coal blocks and 'disincentives' to discourage non/poor
performance.
3. There is a need to constitute an empowered group along the lines of Foreign
Investment Promotion Board (FIPB) as a single window mechanism with
representatives of Central nodal ministries and the State Governments to grant
the necessary clearances such as mining lease, mining plan, forest clearance,
environment management plan and land acquisition for accelerating the
procedures for commencement of production.
4. CCO should conduct physical inspection of allotted blocks on a regular basis
5. CIL should fix its production targets in line with the targets fixed by the Planning
Commission
6. CIL should synchronise its excavation and transportation capacities
7. CIL should expedite setting up of coal washeries as washing capacities of coal are
grossly inadequate in CIL subsidiaries in view of the fact that Indian coal contains
higher percentage of ash and washing of coal is of utmost significance, both for
the efficiencies in the user plants and from the point of view of environmental
concerns besides fetching higher returns.
September 2012
4

mPower
Statistical Review
Monthly trend analysis
July 2012
Capacity Addition
In July-12 India has
commissioned ~1GW
capacity
CEA target for FY13 at
18GW (YTDFY13
achieved ~34% target)
Achievement of 1GW in July-12, YTDFY13 commissioned 6GW
In July-12, India has commissioned 1GW of projects (thermal project). YTDFY13 it
has commissioned 6.2GW of projects (5.9GW Thermal and 0.3GW Hydro projects)
In the 11th plan period, India has commissioned ~54GW of projects (~11GW per
annum) and is targeting to commission 77GW in 12th plan period (~15GW per
annum). CEA has fixed FY13 capacity commissioning target at ~18GW.
All India generating capacity as of July 2012 was 206.5GW, 67% thermal (137.4GW),
19% hydro (39.2GW), 2% nuclear (5GW) and 12% renewable energy (25GW).
Capacity addition (MW)
Particulars
Thermal
Hydro
Nuclear
RES
Total
Jul-12
Target Achieved
1,000
950
50
-
-
-
-
-
1,050
950
%
95
-
n.a.
-
90
YTDFY13
Target Achieved
4,680
5,855
177
301
-
-
-
-
4,857
6,156
%
125
n.a.
n.a.
-
127
FY13
Total % to
Target Capacity Total
15,154 137,386
67
802 39,291
19
2,000
4,780
2
24,998
12
17,956 206,456
100
Source: CEA
All-India installed capacity by fuel (GW)
All India generating
capacity as of July 2012
was 206.5GW, 67%
thermal (137.4GW), 19%
hydro (39.2GW), 2%
nuclear (5GW) and 12%
renewable energy
(25GW)
Nucl ear
2%
Hydro
19%
Thermal
67%
RES
12%
Source: CEA
All-India generation (Aug-12) up 2% YoY, coal generation up 12%
NTPC generation flat YoY
Generation
Aug 2012 All India
generation up 2%
Aug 2012 PLF: 57.9%
(down 353bp YoY)
Aug-12 Generation grew by 2% YoY, Coal plant generation up 12% YoY
All India Power Generation for August-12 stood at 73.3BUs (up 2% YoY). Lower
generation growth during the month is led by de-growth in generation for Gas,
nuclear and Hydro plants at 25%, 5% and 12% respectively. Generation from Coal
projects stood strong at 12% YoY, however PLF stood muted at 62% (down 472bp
YoY). All India power generation growth in July/August-12 has been muted at 2%
each (1QFY13 generation growth was 6% YoY).
Over the last fortnight, ST average price at IEX has weakened and average price
for the week ended Sept-04 stood at INR2.5/unit (v/s INR5.3/unit for week ended
Aug-04), muted prices is likely be aided by pick up in the monsoon in the country.
5
September 2012

mPower
Performance of IPPs: Muted operating performance
Adani Power (APL)
generation for the month stood at 1.4BUs and average PLF
stood at 41% (down 44ppt YoY). APL plant PLF has been muted since the
commissioning of Mundra Ph-III (impacted by transmission constraints). We await
further clarification from the management on the same.
JSW Energy's
generation stood at 1.4BUs and is highest ever in a month. Generation
growth is led by higher PLF at its plant, where-in Karnataka/Ratanagiri plant
operated at PLF of 91% v/s 68% YoY and 85% QoQ. 540MW Rajwest operated at PLF
of 73% v/s 45% QoQ. JSWEL has synchronized U-V & VI in June-12 and is expected
to synchronize U-VII & VIII by 2QFY13.
Tata Power:
Mundra UMPP project (1600MW) generated 394MUs during August-
12 and operated at PLF of 33%, YTDFY13 Mundra UMPP has generated 1.9BUs and
plant operated at PLF of 46%.
Jindal Power's
1GW Tanmar project generation stood at ~707MUs (up 7% YoY) and
PLF stood at 95% (up 6ppt YoY).
Lanco Infratech
thermal projects generated 1.0BUs (down 11% MoM) for Aug 2012.
Udupi project PLF stood at 31% (v/s 84% MoM), while Kondapalli PLF stood at 39%
(v/s 46% MoM). Amarkantak project PLF stood at 66% (v/s 90% MoM) and Anpara
PLF was 27% (v/s 22% MoM).
Sterlite Energy
2.4GW Jharsuguda plant generation stood at 750MUs and PLF at
42% (v/s 43% MoM). Since the commissioning of plant, coal scarcity has impacted
PLF of the plant.
Reliance Power:
R Power 1.2GW Rosa project generated 649MUs and operated at
PLF of 73% (v/s 51% MoM).
All India generation up ~2% YoY, PLF down 353bp YoY in August 2012
Aug 2012
Gen.
PLF
(%)
Thermal-Coal & Lignite 50.8
61.5
Thermal-Gas
5.9
41.8
Nuclear
2.6
72.5
Hydro
14.0
48.9
Bhutan IMP
1.0
NA
Total*
73.3
57.9
* Excludes generation from Bhutan
Aug 2011
Gen.
PLF
(%)
45.6
70.9
7.8
61.5
2.7
76.6
16.0
57.4
1.0
NA
72.1
61.5
YTDFY13
Gen.
PLF
(%)
277.3
69.9
32.8
47.8
13.7
76.0
55.5
16.1
3.0
NA
379.3
72.8
YTDFY12
Gen.
PLF
(%)
245.3 73.1
40.5 62.5
13.3 76.0
62.4 18.6
3.1
NA
361.5 79.1
Source: CEA
APL: Aug-12, PLF at 41%
Adani Power (APL)
generation for the month
stood at 1.4BUs and
average PLF stood at 41%
(down 44ppt YoY)
Source: CEA/Company
September 2012
6

mPower
JSWEL: Gen. at 1.4BUs, Karnataka/Ratnagiri PLF at 91%
JSW Energy's generation
stood at 1.4BUs and is
highest ever in a month.
Generation growth is led
by higher PLF at its plant,
where-in Karnataka/
Ratanagiri plant operated
at PLF of 91% v/s 68% YoY
and 85% QoQ
Jindal Power: Aug Gen. at ~707MUs (up 7% YoY)
Jindal Power's 1GW
Tanmar project
generation stood at
~707MUs (up 7% YoY)
and PLF stood at 95%
(up 6ppt YoY)
Lanco: Aug-12 Gen. stood at 1.1BUs (plant PLF muted)
Lanco Infratech thermal
projects generated
1.0BUs (down 11% MoM)
for Aug 2012. Udupi
project PLF stood at 31%
while Kondapalli PLF
stood at 39%. Amarkantak
project PLF stood at 66%
and Anpara PLF was 27%
Sterlite Energy: Aug-12 Gen. at 750MUs (PLF at ~42%)
Sterlite Energy 2.4GW
Jharsuguda plant
generation stood at
750MUs and PLF at 42%
(v/s 43% MoM). Since the
commissioning of plant,
coal scarcity has impacted
PLF of the plant
Source: CEA
September 2012
7

mPower
Generation, PLF data for companies, project wise
Capacity
(MW)*
Adani Power
- Mundra
4,620
GVK
- JP 1 & 2
455
- Gautami
464
GMR
- Barge Mounted
220
- Chennai
200
- Vemagiri
370
JPL
- Chattisgarh
1,000
Rel Infra
- Dahanu
500
- Samalkot (AP)
220
- Goa
48
- Kochi
174
Rel Power
- Rosa
1,200
Tata Power
- Trombay
1,580
- TISCO (Jamshedpur)
441
- Mundra UMPP
1,600
Torrent Power
- Existing
500
- Sugen
1,148
JSW Energy
- Rajwest
540
- Karnataka/Ratnagiri
2,060
CESC
1,285
Lanco Infratech
- Kondapali
716
- Amarkantak
600
- UPCL
1,200
- Anpara
1,200
KSK
- Wardha
540
Sterlite
- Jharsuguda
2,400
*Monitored capacity by CEA
Aug-12
Generation
PLF (%)
1,414.0
143.1
92.8
38.1
46.7
70.4
707.3
385.1
58.8
23.3
0.0
649.2
817.3
265.0
394.5
254.2
428.8
295.1
1,401.6
814.6
202.9
293.5
331.9
239.6
227.0
749.6
41.0
43.0
27.4
23.7
32.0
26.1
95.1
103.5
36.6
66.4
0.0
72.7
65.0
94.3
33.1
85.4
51.2
73.5
91.5
85.2
38.8
65.7
31.2
26.8
56.5
42.0
Aug-11
Generation
PLF (%)
1,251.7
266.1
268.5
125.5
45.8
198.8
662.5
351.3
136.0
19.6
0.0
303.4
692.0
226.5
0.0
293.0
732.7
0.0
873.8
790.6
230.7
332.5
282.5
0.0
208.7
494.5
85.0
80.0
79.3
78.1
31.4
73.6
89.0
94.4
84.7
55.9
0.0
68.0
56.3
84.6
0.0
82.9
87.5
0.0
133.5
83.0
44.1
74.5
64.5
0.0
70.6
37.6
YTDFY13
Generation
PLF (%)
8,181.3
963.2
651.4
277.6
252.0
653.6
3,508.2
1,878.1
408.4
115.5
0.0
3,160.7
4,214.9
1,285.5
1,855.0
1,448.2
2,292.8
1,361.5
7,150.3
4,069.6
1,306.1
1,420.7
1,834.9
1,489.7
1,493.9
3,706.7
48.7
57.9
38.5
34.6
34.5
48.4
95.5
102.3
50.9
65.9
0.0
71.7
69.2
91.6
45.7
93.2
54.7
68.7
94.5
86.3
50.0
64.5
74.5
33.8
75.3
43.6
YTDFY12
Generation
PLF (%)
5,374.5
1,298.3
1,418.9
563.9
363.2
1,203.7
3,574.2
1,847.0
582.1
122.2
48.7
1,901.8
3,823.9
1,043.8
0.0
1,447.4
3,663.6
62.0
4,536.9
4,001.1
1,789.8
1,531.4
1,376.8
-
1,174.8
2,368.0
68.6
78.1
83.8
70.2
49.7
89.1
97.3
100.6
72.5
69.8
7.7
86.3
61.8
85.6
0.0
83.8
87.5
6.3
75.2
84.8
68.5
69.5
49.5
-
66.2
47.4
Source: CEA
September 2012
8

mPower
NTPC: August-12 generation flat YoY and Coal plant PLF at ~72%
NTPC generation for the month stood at 17.3BUs (up 0.6% YoY), where-in Coal
plant generation stood higher by 1.4% YoY, while Gas based generation de-grew
by 6% YoY. Generation growth for July/Aug-12 stood muted at 2% YoY v/s 1QFY13
generation growth of 8% YoY.
Coal plant PLF for the month stood at 72% (down 679bp YoY). Lower PLF is on
account of maintenance shutdown taken during the month. YTDFY13 Coal plant
PLF stood at 82.5% (down 250bp YoY).
Out of 15 Coal plant station, 10 station have seen lower PLF during the quarter.
Farakka plant PLF for the month stood at 46% (down 12ppt YoY), while PLF is
picked up for Kahalgaon project at 59% (up 5ppt YoY).
NTPC Coal plant PLF: Aug-12 PLF at 72% (down 679bp)
NTPC Gas plant PLF: Aug-12 PLF at 59.6% (down 367bp)
Source: CEA
Plant-wise Monthly PLF (%)
Capacity
(MW)
Northern Region
Dadri
1,820
Rihand
2,500
Singrauli
2,000
Tanda
440
Badarpur
705
Unchahar
1,050
Western Region
Mauda
500
Vindhyachal
3,260
Southern Region
Ramagundem 2,600
Simhadri
2,000
Eastern Region
Farakka
2,100
Korba
2,600
Kahalgaon
2,340
Sipat
2,320
Talcher
470
Talcher
3,000
Coal Plant PLF 29,705
Plants
Jul
88
99
92
67
77
97
Aug
79
83
76
73
81
83
Sep
86
69
77
70
75
77
2011
Oct
87
82
80
88
60
77
Nov
88
94
101
102
63
98
Dec
88
93
92
97
70
93
Jan
91
93
96
100
86
95
Feb
91
96
96
94
83
101
Mar
88
99
102
100
83
101
2012
Apr
66
91
79
60
75
81
0
95
96
96
69
81
72
73
84
98
84
May
86
98
85
65
78
103
0
93
100
99
75
83
86
87
99
96
90
Jun
100
95
91
78
62
102
0
89
87
76
75
79
71
87
100
84
85
Jul
86
86
94
72
80
90
0
82
88
78
55
99
62
83
89
76
81
Chg. MOM
Aug (bp, %)
68
64
93
54
76
85
0
71
77
89
-1,809
-2,236
-106
-1,794
-451
-543
88
99
104
80
96
61
100
80
58
85
73
96
96
59
99
54
94
84
71
79
71
83
94
52
37
58
101
75
74
71
85
80
79
70
69
57
102
73
78
77
98
93
74
74
92
73
101
89
79
88
100
93
79
84
75
58
102
99
80
86
100
100
95
83
62
73
101
94
88
89
98
100
98
66
86
74
99
100
99
92
94
99
103
78
82
84
63
99
100
92
-1,087
-1,036
1,118
46
-862
95
-382
59
-312
74
-945
76
-1,232
60
-1,560
72
-890
Source: CEA
September 2012
9

mPower
YTDFY13 NTPC Coal plant PLF: 10 plants PLF treading lower (%) YTD NTPC Gas plant PLF: Only 2 plant PLF treading lower (%)
Source: CEA
During August 2012 out of 15 coal stations, PLF of 10 Station is treading lower YoY and
for gas stations baring Auraiya and R.Gandhi all the plants PLF is treading higher.
September 2012
10

mPower
Base and peak deficits
July-12 base deficit stood at 9.1% (down 407bp YoY)
All India base deficits for the month of July-12 stood at 9.1% (down 407bp YoY).
Base deficit has been continuously falling in India over the last few months.
However Power demand has been strong, July-12 Power demand grew by 11%
YoY and YTDFY13 power demand grew by 10% YoY.
Peak deficit stood lower to 8.1%. Since Dec-11 peak deficit has seen continuous
MoM fall. However in July-12 peak deficit inched up by 85bp MoM.
July 2012 base deficit
at 9.1% down 407bp
YoY
July 2012 peak deficit
at 8.1%, down by
180bp YoY
All India base Deficit (%): Stood at 9.1%
All India Peak Deficits (%): Stood lower at 8.1%
Source: CEA
July-12 Power demand at 86BUs YoY up by 11%
Source: CEA
IEX ST Price: Weekly Avg at INR2.5/unit (Aug Avg at INR3.5/unit)
Source: IEX
Over the last fortnight, ST average price at IEX has been weak and average price for
the week ended Sept-04 stood at INR2.5/unit (v/s INR5.3/unit for week ended
Aug-04), muted prices is likely be aided by pick up in the monsoon in the country.
September 2012
11

mPower
Company /
Industry analysis
UTILITIES: July-12 Forward maintained at INR4/unit+
Positive for JSW Energy
CERC released forward curve date for Short term (ST) prices for July-12. Contracted
volume for the month stood at 636MUs, down 72% MoM. Average monthly
contracted volume for 1QFY13 and FY12 stood at 2.7BUs and 2.6BUs respectively.
Lower contracted volume in bilateral category could have been led by higher ST
tariff (INR4/unit+) in the market. However we understand ST tariff has seen
uptrend in all categories of ST power.
During the month, 66% of total volume has been contracted at price more than
INR4/Unit v/s 36% MoM and an average of 25% in 1QFY13.
We note that the tariff curve for the contacts executed in July-12 has maintained
at INR4/unit +. Bilateral power delivery in August/Sept has moved up marginally
by ~1-4paise per unit. Sustenance of tariff is led by muted monsoon, lower hydro
generation (source of peak power).
For FY13, amongst our coverage universe, JSW Energy (Buy) and Adani Power
(Neutral) have the highest sensitivity to merchant prices and is expected to sell
~50% and ~25% of their generation at merchant tariffs respectively.
Valuations and view:
We have modeled merchant tariff rates of INR3.5/unit in
FY13; down from INR4.0/unit in FY12. For FY13, amongst our coverage universe,
JSW Energy (Buy) and Adani Power (Neutral) have the highest sensitivity to
merchant prices and are expected to sell 50% and 25% of their generation at
merchant tariffs respectively. JSW energy would remain key beneficiary of falling
coal prices and firm ST prices.
Previous Month (June-12): Moved up the ladder at INR4/unit+
Current Month (July-12): ST Prices continuing at INR4/unit+
September 2012
12

mPower
Company /
Industry analysis
UTILITIES (June-12): ST Power volume record 2-digit growth
Prices firming up; Punjab/UP remains leading procurer
A] Short Term (ST) volume up 17% YoY
As per CERC's Market Monitoring Cell Report for the month of June 2012, power
trading volumes stood at ~9.4BUs (up 17% YoY and 22% MoM). Power trading volume
for the month of June 2012 was higher, while 1QFY13 ST power volume growth
was muted at ~3% YoY. Power trading volume in FY12 grew by 16% YoY and 23% YoY
in FY11.
Volumes in Power exchange and UI has grown by 31% and 44% YoY respectively
whereas bilateral volumes (~44% of ST trade) de-grown by 4% YoY. Bi-lateral
volumes have been lower even in the past month and thus down for 1QFY13 too.
Trading as a percentage to sales for the month stood at 12.3% (v/s 11.4% YoY) and
10.6% (v/s 10.9% YoY) for 1QFY13. PTC India market share during the month stood
lower by 7ppt to 35%, however for 1QFY13 (monthly average) it was 36.8% v/s
32.1% YoY.
June-12 ST volume up 16% YoY, Trading as percentage of generation stood at 12.3%
June-12
June-11
Vol. (MUs) Vol. (MUs)
Bilateral
4,095
4,264
- Through traders
2,947
2,857
- Direct
1,148
1,407
Power Exchanges
1,629
1,249
UI Charges
3,638
2,520
Total
9,362
8,033
Trading as a % of Generation
12.3
11.4
Chg. YTDFY13 YTDFY12
% Vol. (MUs) Vol. (MUs)
(4.0)
10,976
12,102
3.1
7,748
8,474
(18.4)
3,228
3,628
30.5
4,445
3,930
44.4
8,951
7,582
16.6
24,371
23,614
10.6
10.9
Chg.
%
(9.3)
(8.6)
(11.0)
13.1
18.1
3.2
B] ST Price stood at INR4.7/unit up 38% YoY, UI prices goes up
Weighted average short term tariffs in June-12 stood at INR4.7/unit (up 38% YoY).
All categories of ST power prices have moved up; Bilateral, Power Exchange and
UI prices have moved up by 8% / 47% / 88% YoY respectively.
ST Prices at IEX has shoot up over the last one month, led by delayed arrival of
monsoon and lower hydro generation. Average price since July-12 stood at INR4.3/
unit v/s an average of INR3.3/unit over April/May-12.
Valuation and view:
We have modeled merchant tariff rates of INR3.5/unit in FY13;
down from INR4/unit in FY12. For FY13, amongst our coverage universe,
JSW Energy
(Buy) and
Adani Power
(Neutral) have the highest sensitivity to merchant prices
and are expected to sell 50% and 25% of their generation at merchant tariffs
respectively. JSW energy would remain key beneficiary of falling coal prices and
firm ST prices.
September 2012
13

mPower
Prices increased by 13% YoY and down 15% MoM
ST PRICES
Bilateral
Power Exchanges (IEX)
UI Charges (NEW Grid)
All India ST Average Price
Trading Market Size (INR m)
Jun-12
4.1
4.1
5.6
4.7
43,718
Jun-11
3.8
2.8
3.0
3.4
27,245
Change
YoY (%)
7.6
46.8
87.5
37.7
60.5
YTDFY13
4.3
3.7
4.4
4.2
102,128
YTDFY12
4.3
3.1
3.2
3.8
89,176
Change
YoY (%)
(1.9)
18.4
35.3
11.0
14.5
June 2012: Traded volume ~9.3BUs,
up 17% YoY
June 2012: Trading market size
at INR44b
June 2012: Bilateral Price moves up to
INR4.1/unit (INR/unit)
C] June-12: Punjab/UP remain lead buyer of ST power
During the month of June-12, Punjab/UP continued to remain leading buyer of ST
power and contributed ~30% / 21% to ST purchases respectively. YTDFY13, both
these states has bought 45% of ST power v/s 34% in FY12.
TN contribution has been muted at 3%, and has lowered its participation in ST
market over the last few month. For YTDF13, it share stood at ~5% v/s 17%/ 24% in
FY12 / FY11 respectively.
Top 6 ST Buyers (% of total)
Top 6 sellers (% of total)
September 2012
14

mPower
Company /
Industry analysis
COAL INDIA: Challenges being addressed, operating
performance strong
Key watch-outs: Share of market-linked revenue, possible regulatory
headwinds
FY13 to be first year of volume bounceback
FSA deadlock untangling, financial impact not material
Washed coal, E-auction constitute 30% of sales, import parity discount provides cushion
Maintain Buy; MMDR bill, scope of coal regulator need to be watched
FY13 to be first year of volume bounce-back:
Coal India's (COAL) April-July 2012
production/dispatch is up 5.3%/5% YoY. Internal target for production/dispatch stands
at 96/107m tons for 2QFY13, representing growth of 20%/15% YoY. If COAL attains
2QFY13 target, residual growth for 2HFY13 production/dispatch is only 2.3%/7.1% to
achieve FY13E target of 464/470m tons. Thus, there exists possibility of upward revision
in FY13 targets. Rake availability for all the months in FY13 has been higher YoY.
Environment clearance remains key challenge as clearance for 13 projects to increase
production by 25% would be considered on case-to-case basis and not on fast track,
which could have led to production increase of ~30m tons in the 12th Plan.
FSA deadlock easing, financial impact not material:
The board of Coal India has approved
revised penalty structure with base penalty of 1.5% (trigger level of 65-80%) and peak
penalty of 40% (supply below 50%). We believe this is much better than earlier proposal
of 0.01% penalty (below 80%) with 3 years moratorium, and would have high
acceptance with developers. Given the option to import coal to meet any gap between
commitment and own production, we do not expect material impact of penalty on
COAL. Assuming it supplies 65% of coal from its own production and imports 15%, PAT
impact would be just 1% for FY13E, and near zero in FY14E/15E.
Also refer our detailed report
update dated 10 August 2012
Washed coal/E-auction constitute ~30% of sales, import parity discount provides
cushion:
In FY12, washed coal/E-auction coal volumes stood at 68m tons (16% of
dispatch), and sales at INR173b (~30% of total). Given softening coal prices, the upside
possibility is limited. However, we note that immediate impact would be on E-auction
(washed coal contracts are negotiated annually), but even here, 22% discount to
international prices provides cushion. We expect INR100/ton lower E-auction
realization to impact FY13E PAT by 1.5%.
Maintain Buy; MMDR bill, scope of coal regulator need to be watched:
Over the last
12 months, we have seen several initiatives by management/government to address
the challenges facing COAL. Given this, the focus would now shift to improving
operational performance. However, MMDR Bill (providing for 26% profit sharing with
locals) and scope of expected coal regulator are key factors to watch out for.
Buy.
September 2012
15

mPower
Company /
Industry analysis
1QFY13 Results: Coal India performance in-line
Market lined revenue lower, but FSA realization improves
1QFY13 PAT boosted by higher other income:
Coal India reported PAT at INR44.7b
(up 8% YoY) higher than our estimate of INR42.9b led by higher other income at
INR20.7b v/s our est of INR19b. Revenues stood at INR165b (up 14% YoY), lower
than our estimate of INR168b led by lower market linked sales. However EBITDA
for the company stood at INR48b (flat YoY) in-line with our estimate of INR48.1b
led by lower than estimated staff cost and OBR provisioning. The benefit was
partly negated by higher cost of inventory, other expenditure.
Market lined revenue lower, but FSA realization improves:
During the quarter
vis-à-vis our estimates market linked revenues were lower by INR9b led by lower
E-Auction realization at INR2,562/ton (v/s estimate of INR3,000/ton) and lower E-
Auction volume at 13.5m tons (v/s estimate of 15m tons). However FSA revenues
stood at INR120.2b, v/s estimate of INR114.5b led by higher realization at INR1,261/
ton v/s our estimate of INR1,206/ton.
Operational performance improved in 1Q, rail dispatch up 11% YoY:
During the
quarter production and offtake for the company stood at 102m tons (up 6.4% YoY)
and 113m tons (up 6.4% YoY). In 1QFY13, the dispatches through rail has been
higher by 11% YoY, as rakes availability improved to 177 rakes/day v/s 164 rakes/
day YoY. Also, the July 2012 month production/dispatch have been at 31.8 / 36.2 m
tons and Coal India targets production/dispatches of 96 / 107m tons during 2QFY13.
Owing to possible delta in 2QFY13E, we thus revise our FY13E production / dispatch
numbers at 468 / 470m tons (vs earlier 462/464m tons).
Valuations and view, maintain estimate:
We maintain our earnings estimate for
Coal India, as gain from higher volumes, FSA realization and other income is
negated by ~INR370/ton lower E-auction realization now. We expect Coal India to
report consolidated PAT of INR178b in FY13E (up 11% YoY) and INR192b in FY14E
(up 8% YoY).
Also refer our detailed results
note dated 14 August 2012
September 2012
16

mPower
Company /
Industry analysis
1QFY13 Results : NHPC performance above estimate
Incentive and other income boosted PAT
1QFY13 Result better than expected:
NHPC adjusted PAT for 1QFY13 stood at
INR6.5b v/s our estimate of INR5.7b. Higher PAT is led by 1) Higher incentive income
where-in UI income stood at INR440 (v/s INR330 m YoY) and PAF stood at INR630m
boosted by higher PAF at 94% v/s 90% YoY, 2) Higher Other Income at INR2.4b (v/s
our est of INR2.2b) and 3) Lower taxes at 21% v/s our est. of 25%, owing to tax
adjustment related to earlier years.
Operational performance impacted:
During 1QFY13, the generation for NHPC
(Standalone) stood at 6.1BUs, down 2% YoY. Out of its 12 power plant , NHPC
reported generation growth from only 3 plants. Average PLFs for the plants stood
at 74.5% v/s 76.2% YoY. Lower generation at its plants is led by lack of snow fed
water and delayed monsoon. During the quarter NHPC commissioned U-I of
Chamera, while it commissioned U-II and III during 1st week of July.
Projects facing delays:
NHPC has targeted to commission 1.2GW (Including 520MW
Parbatti-III) in FY13 and YTDFY13 it has commissioned 231MW Chamera.
Management highlighted Chutak and Nimo Bazgo ready for commissioning but
need to demonstrate full load, which is partly impacted due to transmission line
delays. We understand local agitation has impacted commissioning of Uri -II while
Kishanganga project is caught in controversy between India and Pakistan.
Valuations and view:
We marginally upgrade our earnings for FY13/14 by 5%/2%
respectively to factor in 1) Higher incentive income, 2) Higher other income during
the quarter. We expect to NHPC to report PAT of INR22.1b in FY13 (v/s INR21.1b
earlier) and INR24.7b in FY14 (v/s INR24.3b earlier). Re-iterate
Neutral,
despite 1x
P/BV valuations given Subdued RoE of 7-8% (a large part of net worth deployed in
cash/CWIP) and delayed capacity addition.
Also refer our detailed results
note dated 8 August 2012
September 2012
17

mPower
Company /
Industry analysis
1QFY13 Results: Tata Power performance below estimate
Impacted by loss at Mundra, Maithon plants and lower profit at coal SPV
Consolidated PAT below estimate:
Adjusted consolidated PAT for the quarter stood
at INR3.1b (v/s estimate of INR4.9b), led by 1) Higher losses at Mundra UMPP
owing to take or pay for Port, shipping and coal (losses at INR1.6b), 2) Losses at
Maithon project at INR178m given equipment issues v/s our estimate of marginal
profits, 3) KPC/Arutmin mines EBIT stood at INR2.5b v/s estimate of INR5.2b and
INR5.1b QoQ. Standalone adjusted PAT for 1Q stood at INR4.1b v/s estimate of
INR1.8b due to higher other income at INR3.5b (v/s estimate of INR0.9b), given
dividend income of ~INR2b from coal SPV.
Core profit of coal SPVs impacted:
During 1QFY13, KPC/Arutmin mines sales
volumes stood at 00m tons (up/down 00% YoY) and realisation dipped to USD84/
ton, vs USD94/ton YoY. Production cash cost increased 21% YoY to USD49/ton, leaving
gross contribution at USD35/ton, down from USD45/ton QoQ and USD54/ton YoY.
Cash cost stood higher despite muted oil cost. This is due to take or pay charges on
Infra facility created for evacuation of coal.
Subsidiaries performance likely to be muted going forward:
For Maithon project,
both the units are now operating but fuel supply could be an issue given delays in
rail line for transportation of coal. On Mundra UMPP, management expects loss of
~INR400m/month for FY13E. Coal SPVs profitability has been impacted due to
pressure on realisation along with cost increase owing to infrastructure cost. BUMI
has guided for realisation of coal at USD90/ton for CY12 and cost savings of USD2-
4/ton, unlikely to be attained given recent trends.
Valuations and view
-
Earnings cut by 5-6% for FY13/14E:
We cut our consolidated
earnings for TPWR by 5-6% for FY13/14E and expect consolidated PAT at INR13b in
FY13E (down 36% YoY) and INR10b in FY14E (down 14% YoY).
Neutral.
Also refer our detailed results
note dated 9 August 2012
September 2012
18

mPower
Company /
Industry analysis
1QFY13 Results: Reliance Infra performance above estimate
Standalone performance boosted by higher EPC margins
Standalone performance boosted by higher EPC margins:
Reliance Infra reported
1QFY13 standalone PAT of INR3.3b v/s our estimate of INR2.5b. PAT stood higher
led by higher EPC EBITDA margins at 17% v/s estimate of 7%. EPC division reported
revenues of INR17.9b (down 59% YoY) while EBITDA margin stood at 17% vs 20%
YoY and 11% QoQ. For FY13 RELI has given guidance for EPC revenue at INR90-100b
and margins at 8-10%.
1QFY13 Consolidated PAT at INR4.1b (up 2% YoY):
1QFY13 consolidated revenues
stood at INR53.8b (up 4% YoY), EBITDA of INR6.7b (down 15% YoY), and PAT after
minority interest at INR4.1b (up 2% YoY). Infra segment (Road segment) revenue
stood at INR984m while EBIT stood at INR364m v/s loss of INR55m YoY. Positive
EBIT contribution from road segment is led by second year of operations for some
of the roads project.
Infrastructure business witness traction:
Reliance Infra's project portfolio
comprises of 24 infrastructure projects aggregating around INR356b, in segments
like Roads (11 projects with ~1,000kms, cost INR120b), Metro Rails (3 projects,
cost INR170b), Transmission (11 projects, cost INR66b), and Airports (5 regional
brownfield airports in Maharashtra). RELI has road portfolio of 11 projects where-
in 7 are operational and another 3 will enter the revenue generation phase in
FY13. In its Metro vertical, Delhi Metro faced structural issues while operating and
thus project is not operational in 1QFY13 for restoration. For Mumbai Metro-1,
RELI has completed 95% civil work and is planning to start entire Metro by FY13.
RELI received viability gap funding of INR5b from MMRDA for Mumbai metro
project. RELI has entered into pact with MSRDC to cancel the sea-link project
(spent INR1b till date) facing issues with alignment and parallel road.
Valuation and view:
We have upgarded net profit of RELI to factor in higher other
income and higher revenue/margins in EPC segment during the quarter. Now we
we expect RELI to report net profit of INR11.6b in FY13E (down 41% YoY), INR13.3b
in FY14E (up 14% YoY).
Buy.
Also refer our detailed results
note dated 16 August 2012
September 2012
19

mPower
Company /
Industry analysis
1QFY13 Results: PTC India performance above estimate
Tolling income boost PAT
1QFY13
performance below estimates but tolling income boost PAT:
During 1QFY13
adjusted PAT stood at INR229m. However, the reported numbers include
contribution from tolling projects, not factored by us in standalone accounts. Tolling
project PBT stood at INR125m and thus adjusted PAT excluding tolling PAT
(~INR88m), stood at INR141m, vs our estimate of INR225m. This was partially led
by lower EBITDA, lower other income at INR26m vs our estimate of INR45m.
Trading margin lower, tolling margins healthy and lower coal cost could further
aid tolling margins:
Lower core PAT was led by lower trading margin at Paisa4.37/
unit (v/s est Paisa5.7). However EBITDA margin for tolling business was healthy at
INR1/unit where-in fixed cost for the project stood at INR1.6/unit and fuel cost
stood at INR3.35/unit. Revenues under tolling arrangement was INR6/unit.
Management however suggested that the higher fuel cost was owing to high cost
inventory usage, lined up on the basis of earlier expectation of project
commisisoning by 4QFY12. Going forward, the lower coal cost would be a key
delta for the tolling proejct profitabiilty.
TN dues realised partly, hopeful of full receipt before 3QFY13; discussion with
UPDISCOMs on:
During the quarter, PTC received INR1b from Tamil Nadu (TN) and
another tranche of INR750m from TN in July/Aug and thus outstanding from TN
stood lower at INR4.8b v/s INR7b earlier. Managment is hopeful of receiving
balance dues from TN by 3QFY13. It is also purusing with UP discoms for dues
recovery; improved visibility on receivables would be a key positive for the stock,
in our view.
Maintain Buy:
We expect PTC to report consolidated net profit of INR2.2b in FY13E
(up 9% YoY) and INR2.8b in FY14E (up 26% YoY). Stock trades at a consolidated PER
of 6x on FY14E basis.
Buy
with revised STOP based TP of INR73/sh, excluding value
of outstanding receivable of INR8b or INR27/sh.
Also refer our detailed results
note dated 16 August 2012
September 2012
20

mPower
News and events
Key developments
August 2012
Government moots compulsory 25-year power purchase pacts for new
projects
The government has proposed mandatory efficiency rate for electricity generation as
well as 25-year long purchase pacts for developers planning to bid for future coal-
fired projects. "Bidding will be on the basis of single variable rather than multiple
variables, (that is) capacity charge with the first year tariff instead of multiple biddable
parameters as in the present Standard Bidding Document (SBD)," one of the official
documents said. The Ministry has also mooted evaluation of bids to be based only on
"non-biddable pre-specified Station Heat Rate (SHR)". The government is in advanced
stages of finalising revised SBDs for future power projects
The government has ruled out an immediate blanket de-allocation of the
coal blocks
The government has ruled out an immediate blanket de-allocation of the coal blocks
without assessing the reasons for the delay. "Two investigations are on - IMG which is
looking into reasoning of delay in coal mining and the CBI which is looking into
irregularity in coal block allocations. CBI filed FIR against five companies, owners of
the companies and unknown officials of the Coal Ministry and state governments in
coal block allocation row, according to reports. Cases of cheating, criminal conspiracy
have been filed against Vimmi Iron and Steel, NavBharat Steel and three other
companies along with owners of the companies and unknown officials of the Coal
Ministry and state governments
Coal India board seeks more time for price pooling mechanism
The Coal India management on Friday failed to convince its board of directors on the
feasibility of a price pooling mechanism to fulfil its proposed supply commitments to
power plants commissioned since April 2009. Independent directors played a key
role in opposing the proposal. Proposed by the Union Government, price pooling
would largely help the new coastal power plants, mostly in the private sector, get
imported coal at a subsidised price. The subsidy on imported coal should be recovered
through an increase in prices of domestic coal, mostly consumed by the Central and
State-owned utilities. Asked if there was any opposition to the "price-pooling"
proposal, Rao said: "It's an internal matter."
NTPC slashes investment
The uncertainty surrounding coal availability has forced the country's largest power
producer NTPC Ltd to cut down its investment size by a fourth or around Rs 50,000
crore. The company had planned to invest more than Rs 2 lakh crore during the five-
year period ending 2017. With a current power generating capacity of 36,000 Megawatt
(Mw), NTPC alone accounts for 92 per cent of India's coal-based capacity in the central
sector. Though the company has fast-tracked capacity addition and added 6,980 Mw in
the last 21 months, which is almost 20 per cent of the total capacity it has added in the
last 35 years, coal supply constraints will push 11,000-Mw capacity addition to the
September 2012
21

mPower
13th Plan period starting 2017-18. "We had to review our 12th Plan capital expenditure
estimate mainly because coal is not available. Around 11,000 Mw of our planned
capacity is stuck for want of coal," a company executive told Business Standard. This
capacity is now expected to come up only in the 13th Plan.
Bain, KKR vie for 30% stake in Lanco's power projects
Lanco Infratech is engaged in talks with private equity firms Bain Capital and Kohlberg
Kravis Roberts (KKR) to sell stake in its power business. Lanco has been trying to find
a buyer for its power business since the beginning of the year. It had talked about
raising around $750 million (Rs 3,892 crore) for a minority stake. This time, the company
is known to have put a higher stake on the block - around 30 per cent in some of its
generation projects.
AG says CERC can alter tariff
The Attorney General's view that the Central Electricity Regulatory Commission (CERC)
has the power to revise or regulate tariffs adopted, based on competitive bidding,
should cheer independent power producers (IPPs). Many IPPs are keen to renegotiate
the tariffs following the sudden spike in coal prices in major producing countries such
as Australia, South Africa and Indonesia. But CERC chairman Pramod Deo refused to
read too much into the AG's remark. "Any decision on UMPP (ultra mega power plants)
or power stations running on imported coal will be based on the contract signed
between generators and procurers," he said. Deo also refused to give any view on the
pleas of Tata Power and Adani Power for imposing force majeure following the hike
in Indonesian coal prices. "Any decision on these companies will be based on the
dispute resolution mechanism in their contracts with state procurers and I cannot
speak more as these are subjudice cases in CERC."
Electricity row: AP discoms rule out settlement with R Power
Andhra Pradesh Government today ruled out in the Delhi High Court the possibility of
a settlement with a subsidiary of Reliance Power Ltd in its dispute over the termination
of its power purchase agreement for the Krishnapatnam Ultra Mega Power Project. "I
am instructed to tell the court that we cannot settle the matter and it cannot be
settled," senior advocate Jayant Bhushan, appearing for the Andhra Pradesh Central
Power Distribution Co Ltd (APCPDCL) and 10 other discoms, told a bench headed by
Acting Chief Justice A K Sikri.
CAG on hydro projects: Delays hike cost by up to INR140b
The Government allotted projects for 20,700 MW to public sector NHPC. Out of this,
only one project for 2,000 MW is being implemented by NHPC. And four of the other
projects were allotted to private players by the State Government. The decision to
move from SPV to NHPC and then to private developers was led by delayed execution
of projects. The projects originally allotted in May 2000 have not yet (March 2012)
been initiated even after lapse of more than 12 years.
CAG reports will precipitate policy paralysis in govt: Moily
Corporate Affairs Minister Veerappa Moily on Wednesday (August 22) said that CAG
reports on power and coal have been done without proper study and that they will
September 2012
22

mPower
precipitate policy paralysis in the government. "As far as the CAG is concerned, we
are going through the reports. And you know that he has come out with so many
things that I don't think anybody can find an answer, because you know all are
speculative and presumptive," he told reporters.
Four states may not buy power based on pooled coal price
As many as four states including West Bengal and Gujarat may not buy costly power
from the generation companies based on pooled prices of domestic and imported
coal. State-owned Coal India has said it would sign pacts with power companies by
assuring them a minimum supply of 80% fuel of the total contract. It would supply
65% of the contracted quantity through domestic production and would meet the
15% shortfall through imports. The prices of the domestic as well as international coal
would be clubbed and an average price would be charged from the power utilities.
NHPC, THDC top bosses face CVC axe
While the Central Vigilance Commission (CVC), which oversees the work of state
agencies and companies, rejected the appointment of A.B.L. Srivastava as chairman
and managing director of NHPC, it denied an extension to R.S.T. Sai as chief of THDC.
In addition, the CVC has also recommended that disciplinary action be initiated against
Srivastava in the form of a "minor penalty", which may include actions such as "censure,
withholding of promotions and future increments, recovery from pay of the whole or
part of any pecuniary loss to government caused by the official's negligence or breach
of orders and pay cuts". This comes after Srivastava was selected by the Public
Enterprises Selection Board (PESB), which oversees hiring for state-owned firms, to
head NHPC.
National link to southern power grid on the cards
India has northern, eastern, north-eastern, southern and western electricity grids.
All of them, except the southern grid, are inter-connected synchronously. The
southern grid is connected asynchronously with the rest of the national power grid.
This has been done through high voltage direct current links and radially operated AC
links. Now, the Centre wants to connect the southern grid with the national grid
synchronously by constructing 765Kv lines between Maharashtra (western grid) and
Karnataka (southern grid). The connectivity between the southern and other grids in
the country may help in easing the congestion of electricity transmission lines in the
country. Besides, this will also help to address power shortage faced by southern
states, said the official.
Apex court admits Adani plea on power supply pact
The Supreme Court on Monday admitted a plea by Adani Power Ltd seeking to
terminate a pact to supply power to public sector Gujarat Urja Vikas Nigam Ltd (GUVN).
According to the agreement inked in 2007, the company was to supply GUVN 1,000
MW of power for 25 years at a levelised tariff of Rs 2.35 a unit. The company had
sought the termination of the power purchase agreement in November 2008 claiming
difficulties in obtaining fuel (coal) sourcing (from Gujarat Mineral Development
Corporation Ltd). It had also reportedly cited the rise in prices of imported coal, for
instance from Indonesia.
September 2012
23

mPower
Valuation and view
Valuation and view
The power sector has seen significant valuation de-rating due to concerns over delayed
capacity additions, merchant prices, lower demand and fuel supply issues. We are
positive about companies that are relatively better positioned on these fronts. Our
top picks in the sector are
NTPC, Powergrid
and
JSW Energy.
Comparative valuations
Recom Mkt Cap
(INR b)
CPSUs
NTPC
PGCIL
Coal India *
NHPC
Private Sector
Tata Power
Adani Power
JSW Energy
Lanco Infra
Reliance Infra
CESC
PTC
* RoE Adjusted
Buy
Buy
Buy
Neutral
1,390
568
2,263
216
CMP
(INR)
169
123
358
18
EPS (INR)
EPS Gr. (%)
RoE (%)
P/BV (x)
P/E (x)
EV/EBITDA (x)
FY13E FY14E FY13E FY14E FY13E FY14E FY13E FY14E FY13E FY14E FY13E FY14E
11.7
8.6
28.3
1.9
5.5
2.2
3.8
1.1
44.2
47.5
7.4
14
10
30
2
4
4
6
2
49
53
9.4
16
19
11
-5
-27
-615
88
302
-42
8
7
20
20
7
8
-25
79
68
85
10
12
26
13
16
28
8
8
8
11
15
6
12
4
14
17
25
8
7
12
16
12
7
12
6
1.8
2.2
4.4
0.7
1.9
1.4
1.2
0.5
0.6
0.7
0.7
1.6
1.9
3.6
0.7
1.8
1.2
1.1
0.5
0.6
0.6
0.7
14
14
13
9
18
19
12
10
10
6
17
12
12
12
8
24
11
7
5
9
6
12
11.1
10.5
8.4
7.6
9.2
9.5
7.4
7.1
Neutral
233
98
Neutral
91
42
Buy
75
46
Buy
26
11
Buy
119
445
Buy
38
299
Buy
16
55
for OB reserves provisions
17.1 15.7
0.3
0.0
7.3
5.5
9.2
9.1
1.8
1.0
4.8
4.5
7.4
5.9
Source: MOSL
Utilities stock performance on absolute basis and relative basis (%) - based on the Sensex
Absolute Performance (%)
1 month
3 months
6 months
CPSUs
NTPC
Powergrid
NHPC
SJVN
Neyveli Lignite Corporation
Diversified IPPs
CESC
Reliance Infrastructure
Tata Power
GMR Infra
GVK Power infra
Lanco Infratech
Private IPPs
Adani Power
JSW Energy
Jaiprakash Hydro
Reliance Power
IndiaBulls Power
KSK Energy
Power Trading
PTC India
Sensex
Top performers are in Green
1.3
3.6
-1.7
-4.3
-6.0
-1.0
-11.9
-2.2
-15.0
-17.0
-16.3
-3.0
-9.7
-17.9
-13.1
-13.3
-1.5
14.7
16.0
-2.2
1.3
-4.2
13.4
-1.0
6.6
0.5
-6.1
-11.2
-9.0
5.2
-26.7
-13.4
-4.5
24.3
-4.2
11.3
-15.3
-0.8
-11.5
12.5
-32.3
-16.0
-29.9
-37.6
-44.9
-45.2
-27.5
-35.5
-42.4
-39.9
-6.9
12 months
3.6
28.2
-25.8
-16.8
-11.1
-1.8
-4.9
-5.3
-31.7
-37.9
-38.2
-52.8
-17.5
-20.6
-6.3
-21.9
-36.1
Relative Performance to Sensex (%)
1 month
3 months
6 months
12 months
0.7
2.9
-2.3
-4.9
-6.6
-1.7
-12.5
-2.8
-15.7
-17.6
-17.0
-3.7
-10.4
-18.6
-13.8
-14.0
-2.2
-7.7
-
6.6
7.9
-10.3
-6.7
-12.3
5.4
-9.1
-1.5
-7.6
-14.2
-19.3
-17.1
-2.9
-34.8
-21.5
-12.5
16.2
-10.4
-
-3.9
11.6
-15.1
-0.5
-11.2
12.8
-32.1
-15.7
-29.6
-37.3
-44.7
-44.9
-27.2
-35.2
-42.1
-39.7
-6.6
1.0
25.6
-28.5
-19.5
-13.8
-4.5
-7.5
-8.0
-34.4
-40.6
-40.9
-55.5
-20.2
-23.3
-9.0
-24.6
-38.8
-7.0
-2.3
-4.6
-25.3
0.7
8.1
(0.3)
2.7
font and worst performers are in red font
-4.3
-28.0
-
-
Source: Bloomberg/MOSL
September 2012
24

Motilal Oswal Utilities Research Gallery

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