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Monday, 27 July 09
ADANI POWER'S $625 MILLION IPO TO GENERATE HOT DEMAND
 WSJ reported that, Adani Power, the electricity generating unit of India's Adani Enterprises Ltd., is set raise up to US$625 million in what analysts say will be a hotly contested initial public offering.
Gearing up to list next month after stalling when markets were hit early last year, Adani Power's revived IPO will be the largest in India since Reliance Power's $2.9 billion IPO in January 2008.
While Adani Power has yet to have up-and-running power plants - the first phase of a 330-megawatt plant in Mundra, in the western Indian province of Gujarat, comes on line this month - and its IPO pricing isn't cheap, analysts say the offering is a good buy.
Controlled by the Adani Group, which is known for delivering projects on time, Adani Power also has the advantage of being a power producer in a country where electricity shortages are common.
"Adani Power is a well-thought-through venture with a focus on high-power deficit states (in India), 25-year power purchase agreements with a 72% off-take, and 15 years of coal supplies guaranteed," Bhargav Buddhadev, a power sector analyst with Noble Research, said in a recent note.
The 301.65-million share offer, which has an indicative price range of 90 rupees-100 rupees ($2.07) , raising $625 million at the top end, opens for subscriptions from retail and institutional investors Tuesday and ends Friday.
The company is 81.5% owned by family controlled Adani Enterprise Ltd., a unit of the ports-to-property conglomerate Adani Group, and 8.5% by UK private equity firm 3i Group Plc.
After the IPO, Adani Power will be 70.2% owned by Adani Enterprises, 7.4% by 3i and 1.2% by Capital Trade & Investment Pvt Ltd, another unit of the Adani Group.
The share sale comes as India faces acute energy shortages that have increased over the years despite a growing economy.
Between April and May this year, India had a peak energy deficit, which calculates the difference between energy demand and supply, of 12.3%. In the western part of the country, where Adani Power is setting up four power plants, the deficit was 15.9%, the highest for any region.
Two of the new power plants, in Mundra and Dahej, are in Gujurat; the Kawai plant is in Rajasthan, and the Tiroda one in Maharashtra.
The four have "attractive economics with a payback to IPO equity investors in two and a half years if the project goes to plan," Mr. Buddhadev added, referring to the fact that the company has already signed 25-year contracts with the state-owned electricity boards in those places.
Adani Power has signed those 25-year pacts for 72% of the power its plants are set to produce at tariffs ranging between 2.64 rupees and 2.94 rupees per unit. The remaining 28% will be sold to individual merchants at spot rates, which are currently hovering around 8-9 rupees per KWh. The production price is around 2 rupeess per KWh.
"Adani Power has close to 30% of its capacity set to be sold on a merchant basis, which will give higher returns," said Deven Choksey, the managing director of Mumbai-based brokerage K.R.Choksey Shares & Securities, who recommends the stock to long term investors.
Independent investment advisor and National Stock Exchange member S.P. Tulsian, who sees the 100 rupees top end of the price band as good value said the company can theoretically make annual returns of 35% on its shareholder funds, given "assured returns available to power projects and with (a relatively higher debt-to-equity) gearing of about 4:1."
CLSA's Abhishek Tyagi predicts that the company will record earnings per share of 3 rupees, 5.8 rupees and 10.7 rupees for the financial years ending March 31, 2010, 2011 and 2012 respectively.
This translates to a price to earnings ratio of 33.3 times, 17.2 times and 9.3 times forward earnings respectively, using the upper end of the indicative IPO price range of 90-100 rupees.
But there are risks, partly related to the fact that the company's plants have yet to start production. At a 100 rupees IPO price, Adani Power trades at 3.8 times price-to-book compared with a lower 3.1 times for the sector, according to Noble Research's Buddhadev.
The Chinese equipment to be used by Adani Power has historically been less reliable and not as efficient as locally made turbines, and the company's dependence on coal from Indonesia exposes the company to regulatory and commercial risks, Mr. Buddhadev said.
Adani Group also has licenses to operate just two of the three mines it needs coal from in Indonesia.
Still, the Adani Group's ability to finish large projects on time will stand Adani Power in good stead, analysts said. Adani Power has four thermal power plants under various stages of development and planning with a combined planned capacity of 9900MW. The company plans to utilize the share sale proceeds to part fund the set up of power units in Mundra and Tiroda.
"While other power companies take between four to five years to implement a project of this size, the fact that Adani Power will only take three years, works to the advantage of the investor," Mr. Choksey said.
Source: WSJ India
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Saturday, 25 July 09
HUANENG EYES MAJORITY STAKE IN PT BERAU COAL
CCTV reported that, China's largest publicly traded power company has submitted a bid for controlling stake in Indonesia's fifth largest coal mine ...
Saturday, 25 July 09
ADANI POWER TO IMPORT COAL FOR MUNDRA PLANT
BL reported that more than 50% of the coal requirement for Adani Power’s 4,620 MW Mundra plant will have to be imported from Indonesia though ...
Friday, 24 July 09
INDONESIAN COAL NEWS - UPDATE
Income from tax slow
Since the economic crisis in October 2008 until now, tax from the general mining sector is slow. According to the Director Gene ...
Friday, 24 July 09
S.AFRICA JAN-JUNE EXPORTS TO ASIA AROUND 1.4 MLN T
* China takes 140-150,000 tonnes
* S.Korea imports zero
* Hong Kong utilites buy S.African coal
South African coal exports to Asia excluding India a ...
Friday, 24 July 09
BIG ADARO SHAREHOLDERS CREATE HOLDING COMPANY
The nation’s second-largest coal producer, PT Adaro Energy, said on Thursday that five key shareholders had merged their holdings in the compan ...
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- Sical Logistics Limited - India
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- The Treasury - Australian Government
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