Adani Power, which has recognised about Rs 4,400 crore as compensatory tariff (CT) up to December 2016 as part of revenues from its Mundra project, may have to reverse or write off about 80 per cent of this. According to analysts at Nomura, at least 80 per cent of the CT would be attributed to change in Indonesian coal pricing regulations, which the Supreme Court has disallowed in a ruling on Tuesday.<\/p>\n
The ruling set aside Appellate Tribunal for Electricity’s (APTEL’s) order on CT given in April 2016 and comes as a major setback for Adani Power. The compensatory tariff had been allowed by APTEL in April 2016 given the change in coal pricing policy by Indonesia and the unavailability and shortfall of domestic coal. This had, however, been challenged by state electricity boards in the apex court.<\/p>\n
“On the Tiroda and Kawai projects, which have no linkage coal entitlements, interpretation by the Rajasthan Electricity Regulator and Maharashtra Regulator of shortfall or non-availability of domestic coal as a \u2018change in law\u2019 would be critical,” say Anirudh Gangahar and Archit Singhal at Nomura. In their view, full recovery of CT \u2013 Rs 3,300 crore recognised so far for the two projects \u2013 is still debatable. Therefore, considering the uncertainty on earnings and cash flow outlook in the context of the Supreme Court judgment, Nomura maintains a reduce rating on the stock. <\/p>\n
While the Supreme Court has denied compensation for fuel cost under recovery in case of imported coal plants, it has referred the case back to the Central Electricity Regulatory Commission to quantify the tariff relief to be provided to plants that had to resort to higher use of imported coal due to lack of availability of domestic coal. Kotak Institutional Equities says that while the fine print of the order makes little change to its interpretation for Tata Power, it brings relief for Adani Power as not all power purchase agreements (PPAs) will be denied compensatory tariff. The brokerage maintains their sell rating and target price on Adani Power.<\/p>\n
Most analysts have been cautious on the stock. Post the December quarter results, analysts at Reliance Securities had said that the company continues to report dismal numbers due to lack of adequate coal supply from the company\u2019s Bunyu mines in Indonesia, which has been forcing the company to blend expensive spot coal inventory as well as importing a higher quantum of coal due to limited availability of domestic coal and PPAs signed at low rate.<\/p>\n
Analysts at Edelweiss will visit the order for various legal interpretations to assess the impact on earnings and valuations of private developers. However, prima facie, they envisage a Rs 13-18 hit on Tata Power\u2019s sum-of-the-parts (SOTP) target of Rs 85. They will await further clarity on the APTEL order for Adani Power (SOTP of Rs 28). Analysts at Ambit Research say that Tata Power may look at alternatives like sourcing domestic coal at competitive prices and ramping up plant load factor to sell power to merchant markets. They remain positive on Tata Power on the back of rising investments in the Mumbai circle and return on equity improvements.<\/p>\n","protected":false},"excerpt":{"rendered":"
Adani Power, which has recognised about Rs 4,400 crore as compensatory tariff (CT) up to December 2016 as part of revenues from its Mundra project, may have to reverse or write off about 80 per cent of this. According to analysts at Nomura, at least 80 per cent of the CT would be attributed to change in Indonesian coal pricing regulations, which the Supreme Court has disallowed in a ruling on Tuesday. The ruling set aside Appellate Tribunal for Electricity’s (APTEL’s) order on CT given in April 2016 and comes as a major setback for Adani Power. The compensatory tariff […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[132],"tags":[],"class_list":["post-108643","post","type-post","status-publish","format-standard","hentry","category-power"],"acf":[],"_links":{"self":[{"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/posts\/108643","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/comments?post=108643"}],"version-history":[{"count":0,"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/posts\/108643\/revisions"}],"wp:attachment":[{"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/media?parent=108643"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/categories?post=108643"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/tags?post=108643"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}