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Tata Power Ltd (updated - 10 June 2009)
With Tata Power now in aposition to sell 100 MW of power from its Trombay unit as merchant sales, the company’s earnings for the current year should get a slight boost. In the current year, the higher generation— estimated to be higher by 10-15 per cent — is what will push up revenues rather than any significant increase in power realisations.

From Rs 7,071.5 crore last year, stand-alone revenues are expected to increase by about 10 per cent this year. Consolidated revenues showed much higher growth of 60 per cent last year mainly because the company’s coal mines fared better with coal prices ruling high.

Tata Power may have added just 420 MW of capacity last year but it plans to increase capacity five-fold from 2785 MW currently to 13,000 MW by 2014. The first phase of the Mundra UMPP of 800 MW will be commissioned in September 2011 with about afourth of the work having been completed.

Apart from a gap of around Rs 3,000 crore, which is the equity contribution to be made over three years, the company has tied up loans amounting to Rs 12,000 crore. Meanwhile, with coal prices bottoming out, concerns over realisations from the Bumi coal mines, in which Tata Power holds a30 per cent stake, should ease. The mines are currently profitable with coal prices at around $60 per tonne and an average selling price of $50 per tonne over the longer term should be good enough to ensure that Tata Power repays the loans that it took to acquire the mines.

The Street has been concerned about the repayment of the loans amounting to around $750 million. However, these concerns seem exaggerated because a fairly large portion is due only in 201415, by which time the Mundra plant should be generating cash flows.

Tata Power is a great play on India’s chronic power shortage though at the current price of Rs 1,140, the stock trades close to it sum-of the- partsvaluation price of Rs 1,200.

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Tata Power Ltd (updated - 01 April 2009)
The sales of an 8 per cent of its stake in Tata Teleservices, by Tata Power for Rs 317 crore has probably made up for the disappointment of Tata Sons choosing not to convert its preferential warrants. Of course, given the funding gap for projects, the Street is anticipating that Tata Power will reduce its stake in some of the project SPVs or even dilute equity in the parent company. The company needs an estimated Rs 5,000 crore as contribution towards equity for various projects and more than half of this is expected to be generated from internal accruals. Besides, more of its investments can be sold which is not a bad idea because otherwise these are not always fully valued. As for the loans taken to buy a 30 per cent stake in two Bumi coal mines, Arutmin and KPC, perhaps too much is being made of falling coal prices.
Tata Power should manage to repay the loans more or less as scheduled, even at prices of $45 per tonne, though it may need to postpone some expenditure. Coal prices are currently ruling at around $60-65 a tonne.

Outstanding loans for Bumi are expected to come down to $775 million by March 2009 from $850 million currently. The stock is a good play on the power shortage in the country because the firm is expanding capacity to 11,000 MWin the next four years and most of the debt for the projects, of around Rs 18,000 crore, has been tied up.
source - BS

Tata Power Ltd (updated - 04 Aug 2009)
Tata Power managed to sell 4,180 million units of power in the June 2009 quarter, 2 per cent more than it did in the corresponding period of the previous year. But lower revenues (down 14 per cent) and a couple of one-time expenses left the profit before tax at Rs 254 crore and the net profit before exceptionals at Rs 204 crore.

The Street was atad disappointed with sales of units — the Mumbai licence area didn’t perform as well as expected. However, generation should start stabilising with Jojobera, Haldia and Trombay units having been commissioned.

Power revenues were lower during the quarter because power purchase costs (a pass-through item in tariffs) came off sharply and pulled down the total revenue to Rs 1,743 crore. This time around, Tata Power’s own units contributed more to the total generation. Besides, the raw materials bill was smaller due to the sharp fall in imported coal prices.

The operating profit of Rs 360 crore would have been higher had it not been for some one-times expenses at two of the power plants and at the strategic electronics division. Adding to the company’s expenses were higher interest payments, amounting to just over Rs 100 crore. Despite higher other income, the profit before exceptionals was Rs 185 crore, just about 3.3 per cent higher than for the corresponding quarter of the previous year. Reported profits were higher because the company accounted for revenues of Rs 232 crore relating to previous periods after receiving permissions from MERC (Maharashtra Electricity Regulatory Commission). During the quarter, merchant sales accounted for 5 per cent of sales, but this should increase in the next few quarters. Tata Power’s Rs 1,650-crore GDR issue last month should bring down interest costs and strengthen the balance sheet.

Meanwhile, the company’s 4,000-Mw Mundra ultra mega power project is on track with the first 800-Mw unit scheduled to be commissioned in September 2011. The other large project, a 1,050-Mw thermal power project, that Tata Power is implementing in partnership with Damodar Valley Corporation, has also achieved financial closure and is on schedule. Analysts attribute a sumof-the-parts valuation to the stock of Rs 1,250 per share.
source - BS

Tata Power Ltd (updated - 01 Sept 2009)
Tata Power’s consolidated profits for the June 2009 quarter were driven more or less equally by both the coal and the power businesses. With the earnings before interest tax and depreciation (ebitda) margin up 500 basis points at 22 per cent year-on year, the ebitda rose 41 per cent year-on-year to Rs 962 crore.
While the reported profits were up 93 per cent at Rs 358 crore, these include income from earlier periods and foreign exchange gains; the profit before tax was up 38 per cent at Rs 590 crore. Revenues from the coal business rose a strong 14 per cent year-on — year with the business seeing margins expand by 300 basis points. With coal prices looking like they’re bottoming out, realisations from the Bumi coal mines, in which Tata Power holds a 30 per cent stake, should stabilise.

The mines are profitable if coal fetches $60 per tonne and an average selling price of $50 per tonne, over the longer term, should enable Tata Power to repay the loans, of around $750 million, that it used to buy the stakes in the mines. Most of the amount is due only in 2014-15, by which time the Mundra plant should be seeing cash flows. Industry watchers estimate realisations for coal in the current year of $65 per tonnes. Meanwhile Tata Power recently raised approximately Rs 1,650 crore through GDRs, priced at Rs 1,090 per share. That would form part of the Rs 3,000 crore of equity needed to fund projects over the next three years.

Apart from strengthening the balance sheet, it should speed up execution for a capacity of 1800 MW. The 4,000 MW Mundra UMPP is on track with the first 800 MW unit scheduled to be commissioned in September 2011. While merchant sales currently comprise a very small portion of Tata Power’s sales, at just around 5 per cent, this share should increase. In the June quarter merchant sales fetched the company around Rs 5-6 per kwh. The company plans to increase generation capacity fivefold from 2785 MW currently to 13,000 MW by 2014. Analysts attribute a sum-of-the parts valuation to the stock of Rs 1400 per share.
source - BS

Tata Power Ltd (updated - 12 Nov 2009)
With new units being commissioned at Trombay, Haldia and Jojobera over the past few months, Tata Power was able to generate 17 per cent more power during the September 2009 quarter and sell 16.5 per cent more compared with the corresponding period last year.

However, since fuel costs, especially those of imported coal, have fallen 33 per cent over the past year, realisations have come off 25 per cent to Rs 4.28 per unit. Fuel costs are a pass through item for power utilities.

Realisations have dropped even though the company was able to sell more merchant power at higher-than-average tariffs of Rs 5.50-6 per unit. With the power business bringing in lower revenues, total revenues for Tata Power during the quarter dipped by just under 15 per cent to Rs 1,670 crore.

However, the operating profit was up 37.6 per cent, though a higher depreciation, interest and tax rate depressed the net profit before exceptional items, down 4 per cent at Rs 180 crore. That’s despite the company making Rs 120 crore on other income.

Having raised Rs 1,650 crore through GDRs recently, Tata Power has deleveraged the balance sheet and now has the required funding needed to fund its projects over the next three years. The company’s 4,000 MW Mundra UMPP is on track with the first 800 MW unit scheduled to be commissioned in September 2011, while the 1,050 MW joint venture Maithon power project should be up and running by the third quarter of 2010-11.

The company plans to increase generation capacity five-fold from 2,785 MW to 13,000 MW by 2014. Analysts have been concerned that the low prices of coal would hurt business from the Bumi coal mines, in which Tata Power holds 30 per cent stake.

However, coal prices seem to have stabilised and the mines should be profitable allowing Tata Power to repay the $750 million that it had borrowed to buy the stakes in the mines. Most of the payments are scheduled for 2014-15, by then the Mundra plant should be generating cash flows.

Analysts attribute a sumof-the parts valuation to the stock of Rs 1,400 a share which, apart from the power generating business, includes cash and investments and the value of the coal mines.
source - BS