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Tuesday, June 22, 2010
RELIANCE POWER = A LONG TERM INVESTOR'S DELIGHT = GOOD MULTI BAGGER IN 2-3 YEARS
Reliance Power Limited
NSE Symbol RPOWER
REVIEW OF OPERATIONS
RESULTS FOR FY 10
& Recent News
What Company web site indicates :
Reliance Power Limited is part of the Reliance Anil Dhirubhai Ambani Group and is established to develop, construct and operate power projects domestically and internationally. The Company on its own and through subsidiaries has a portfolio of almost 35,000 MW of power generation capacity, both operational as well as under development.
The power projects are planned to be diverse in geographic location, fuel type, fuel source and off-take, and each project is planned to be strategically located near an available fuel supply or load center. The company has over 1,000 MW of operational power generation assets. The projects under development include seven coal-fired projects to be fueled by reserves from captive mines and supplies from India and abroad, two gas-fired projects to be fueled primarily by reserves from the Krishna Godavari Basin (the "KG Basin") off the east coast of India, and seven hydroelectric projects, six of them in Arunachal Pradesh and one in Uttarakhand.
The fuel supply for the majority of the projects has been tied up. Coal linkages have been allocated for domestic coal based projects. The company has domestic coal reserves of over 2 billion tonnes in India, the highest in the private sector in India. The company is expected to become the largest private sector coal mining company in India once the captive coal mines become operational.
The company plans to sell the bulk of the power generated through long term PPAs with distribution companies and through Case I bids. The company has also entered into long term contracts with industrial consumers to supply power.
The company has won three of the four Ultra Mega Power Projects (Sasan UMPP, Krishnapatnam UMPP & Tilaiya UMPP) awarded by the Govt of India till date. The UMPP is an initiative by the government to collaborate with power generation companies to set up 4,000 MW projects to ease the country’s power deficit situation.
Besides these, Reliance Power is also considering the development of coal bed methane (CBM) power generation projects based from CBM blocks being exposed by its affiliates. The company is also planning to register projects with the Clean Development Mechanism executive board for issuance of CER certificates to augment its revenues.
The following projects are under its fold. What the web site says and a few of the recent news items are given below for each project. Readers are requested to indicate - any additions, corrections, suggestions etc :
Samalkot, Kochi & Goa Power Projects :
Reliance Infrastructure and Reliance Power Boards, on 27th May 2010, are understood to have approved the transfer of 433 MW power generation assets of Reliance Infrastructure comprising of 220 MW at Samalkot(has been supplying power to AP Transco under a 15 year PPA.) , 165 MW at Kochi (Which has a 15 year Power Purchase Agreement with Kerala State Electricity Board) and 48 MW at Zuarinagar_ Goa(which has been supplying power to Government of Goa as well as various industrial consumers in Goa) to Reliance Power. The entire share capital of these subsidiaries has been agreed to be transferred by Reliance Infrastructure to Reliance Power to bring entire power generation portfolio under one roof. All three plants have significant potential for capacity expansion
With this acquisition and commissioning of its 600 MW Rosa Power Project in UP, Reliance Power will have over 1000 MW operating capacity under its portfolio. This a good Progress -specially for the bottom line of R’Power.
Rosa Stage 1:
The 300 MW - Unit I of the Rosa Power Project was synchronized to the grid on December 28, 2009 and has been in operations since then.
As per news dt 17.06.2010 - 300 MW - Unit II of Rosa Power Project has been successfully synchronized to the UP State Grid on June 15, 2010 and has commenced the generation of power. With this Rosa stage 1 of 600 MW seems to be complete.
Reliance Power's wholly owned subsidiary Rosa Power Supply Company Limited is setting up 1,200 MW Rosa Power Project in Shahjahanpur District of U.P. Now, Stage 2 of 600 MW needs to come up.
PROJECTS UNDER DEVELOPMENT
Rosa Stage 2 a 600 MW coal-based power project in Uttar Pradesh:
It is a coal based project with two units of 300 MW each and is similar to Rosa Stage I. Rosa Stage 2 is scheduled to commence power generation within the 11th plan (i.e. by March 2012). This is a brownfield expansion and hence is utilizing the additional land acquired and water allocated for Rosa Stage 1. The project has obtained all major approvals from the Government of Uttar Pradesh and construction is progressing according to schedule in the site.
Rosa Stage 2 has entered into a Power Purchase Agreement (PPA) for 50% of its generation capacity (300 MW) with Uttar Pradesh Power Company Limited (UPPCL) on a cost plus tariff basis based on Tariff Guidelines set by the Uttar Pradesh Electricity Regulatory Commission (UPERC). The balance 300 MW will be sold on a merchant basis and a PPA has been signed with Reliance Energy Trading Limited (RETL).
Fuel supply has also been secured with Government of India awarding long-term coal linkage for the expansion.
The project has achieved financial closure with a consortium of banks led by IDBI Bank.
Butibori Power Project :
The Engineering, Procurement and Construction (EPC) contract was awarded to Reliance Infrastructure Ltd. and the Boiler Turbine Generator (BTG) contract was awarded to Shanghai Electric Co. The project has achieved financial closure with a consortium of banks led by Axis Bank in July 2009. The project is currently in the construction phase and is expected to be commissioned by March 2012.
Media release dated July 27, 2009, titled "Reliance Power's Butibori Project achieves Financial Closure".Reliance Power, is currently developing a 600 MW coal-based power project (2 units of 300 MW each) with subcritical technology to be located at Butibori, Maharashtra Industrial Development Corporation (MIDC) area in Nagpur, Maharashtra. The construction of the Project, which is expected to be completed in the 11th Plan.
Sasan UMPP - a 3,960 MW pithead coal-based Project in Madhya Pradesh.
The plant has been allocated three captive coal blocks, Moher, Moher-Amlohri Extension, and Chhatrasal to meet its fuel requirements. The first Unit of the project shall be commissioned by 2012 and subsequent units will be commissioned at a gap of 3 months each.The EPC contract has been awarded to Reliance Infrastructure Ltd. and the BTG contract has been awarded to Shanghai Electric Co.
Info dt 21-04-2009 : "Sasan Power Limited, a 100% Subsidiary of the Company has executed financing agreements for the 3,960 MW pithead coal based Sasan Ultra Mega Power Project located at Singrauli district, Madhya Pradesh".A Power Purchase Agreement has been executed with 14 Procurers comprising 7 States and their off take shares are as follows; Madhya Pradesh (Lead Procurer) will be entitled for 37.50% share, followed by Punjab (15%), Uttar Pradesh (12.5%), Delhi (11.25%), Haryana (11.25%), Rajasthan (10%) and Uttarakhand (2.5%).
Krishnapatnam UMPP Ultra Mega Power Project, a 4,000 MW imported coal-based Project in AP:
As per company web site , located approximately 3 km from the nearest port where imported coal will be delivered to supply fuel for the project.
The project will be a coal-based project and will employ super-critical technology; scheduled to come on-stream by September 2013, when the first unit is commissioned and the project is scheduled to be fully commissioned by October 2015.
Coal is planned to be imported from Indonesia. Construction activities at the site have commenced. All key clearances and approvals required for the Project are in place. All the required site studies have been completed.
The company is now focusing on early financial closure. IDBI and Power Finance Corporation (PFC) have been appointed as the co-lead arrangers for the Project and have also sanctioned Rupee Loans.
As per recent news, The Company's wholly owned subsidiary, Reliance Coal Resources Limited, has entered into Share Purchase Agreements to acquire the entire share capital of two coal companies in Indonesia. These two Indonesian companies own three coal mines in Indonesia. The coal from these mines will be used in the Krishnapatnam Ultra Mega Power Project and other power projects of the group – info dt 10.06.2010.
Chitrangi Power Project - a 5,940 MW coal-based power project in Madhya Pradesh:
The company has already obtained part possession of the land and the balance land is also expected to be transferred shortly. The project has also obtained in principle water allocation from GoMP.
Permission has been obtained from the Govt of India to use the incremental coal from the captive coal blocks allocated for Sasan UMPP.
Reliance Power has already secured a bid to supply 1,241 MW (net back basis) power to Madhya Pradesh Power Trading Co Ltd (MPPTCL) at a levelized tariff of Rs 2.45 a unit from the Project. The Company is also pursuing other opportunities to tie up for off-take of balance capacity. The company intends to sell the power through a mix of merchant power sale and Case I PPAs.
Environment Clearance accorded to Chitrangi Power Private Limited by MOEF on 28th May 2010
Tilaiya UMPP - a 3,960 MW pithead coal-based power project in Jharkhand :
- Reliance Power Limited has acquired 100% ownership of Jharkhand Integrated Power Limited (JIPL) - the special purpose vehicle company formed to implement Tilaya UMPP - from Power Finance Corporation Limited (PFC). The pit head based coal fired power plant to be developed in the State of Jharkhand will have estimated outlay of Rs. 20,000 crore. As per the PPA the first unit is scheduled to be commissioned in May 2015 and the project is scheduled to be commissioned by May 2017.
GAS BASED POWER PROJECTS
(Gas-based power projects of total capacity of 7,000 MW - at various locations in India including Dadri and Shahapur,MH)
Dadri, 7,480 MW gas-based power project, Uttar Pradesh :
The project entails the development, construction and operation of a 7,480 MW gas based power generation project at Dhirubhai Ambani Energy City, near Dadri in Ghaziabad District of Uttar Pradesh.
The power project, once fully operational, will be the world’s largest gas based power generation plant at a single location. The project has received all statutory clearances from the Central and Uttar Pradesh Government authorities including Environmental Clearance from the (MoEF) for the full capacity of 7,480 MW, award of Mega Power Project Status from the Ministry of Power, water allocation (allocation from Ganga Canal and ground water resources), etc.
While this is what the R’Power web site says – other news is – about repossession of land earlier given to the company by the UP Government, on which, the latest position is not known.
In view of this, R’Power SEEMS to be toying with the idea of shifting the location nearer gas sources in AP- if Gas allocation is forthcoming. But, Government Policy Position seems to be – to allocate Gas only when the projects are nearing completion and not earlier.RIL Chairman Mukesh Ambani also told company shareholders that his firm will supply gas to ADAG plants as and when they are ready and it is subject to the allocation being made by the government. Wherever it is to be located – it is bound to take 24-36 months for completion. However, whatever the two brothers agree between themselves – may take place quickly. The moves of Anil Ambani on this and other issues may be known from the coming AGM proceedings of the company.
Shahapur Coal and Gas, a 4,000 MW combined gas-based and coal-based Power Project:
Maharashtra Energy Generation Limited (MEGL), a wholly owned subsidiary of Reliance Power, is currently developing a combined 1,200 MW coal-based and a 2,800 MW gas-based power project at Shahapur, Dist Raigad, and Maharashtra.
The project has received all major clearances and approvals including Environmental Clearance from Ministry of Environment and Forest (MoEF), the Government of India, including for Captive Jetty and other infrastructure facilities in Coastal Regulation Zone (CRZ). The Government of Maharashtra (GoM) already granted firm water allocation for the project. MEGL’s Resettlement & Rehabilitation (R&R) proposal has been reviewed by the Maharashtra State Rehabilitation Committee and granted in-principle approval.
Recent News item on June’3rd v-4th states that - the Anil Ambani group company R’Power plans to set up a 4,000-Mw, gas-based power plant in Maharashtra with an investment of Rs 15,000 crore.
The company has received bids for the equipment supply and construction and is expected to finalise the contract in a few weeks.The power plant at Shahapur in Raigarh district has requisite approvals, including environmental clearance and land acquisition, in place. Maharashtra was one of the locations the company was considering for setting up gas-based power plants. With the supply agreement with Reliance Industries (RIL) to be finalised soon, the Shahapur plant could be commissioned in the next 18-24 months.
The state government has made water allocation for the project. “Preliminary infrastructure work has been completed and the construction will commence immediately after gas allocation is made. The main objective is to get started with the power project once gas agreement with RIL is signed. The plant capacity would be gradually ramped up to 4,000 MW. The company expects gas for the project to be allocated from the KG-D6 gas fields through this East-West pipeline. The plant site is near the gas pipeline.
Its 7,840-Mw capacity power plant at Dadri has been facing land acquisition problems. There have been reports that the capacity of the Dadri plant would be reduced, but the company has not come out with any final view on this issue.But, of course, we need to hear the company’s plans at its forthcoming AGM on both Dadri and Shahapur and other plants.
ARUNACHAL HYDRO ELECTRIC POWER PROJECTS
Tato II HEPP- currently developing a 700 MW (4x175 MW) run-of-the-river hydroelectric power project on the Siyom River in West Siang, Arunachal Pradesh. Detailed Project Report (DPR) has been prepared by SNC Lavalin, Canada and the same has since been submitted to Central Electricity Authority (CEA) for according Techno Economic Clearance (TEC).
Preliminary work including surveys, design of project layout for DPR and construction methodology are either completed or well on their course of completion.
Siyom HEPP- developing a 1,000 MW (4x250 MW) run-of-the-river hydroelectric power project on the Siyom River in West Siang, Arunachal Pradesh.Under the terms of the MoA, the project is required to be implemented on a Build-Own-Operate-Transfer (BOOT) basis for a concession period of forty years from the commissioning date. The Detailed Project Report (DPR) had been prepared by NHPC in 2003 and is being reviewed/updated by Halcrow, UK. The Project has got statutory Environmental clearance from Ministry of Environment & Forest and Defense clearance and is currently moving forward at brisk pace
Urthing Sobla HEPP- Urthing Sobla Hydro Power Private Limited (USHPPL), an 80 percent subsidiary of Reliance Power, is setting up a 400 MW (4x100 MW) run-of-the-river hydroelectric power project on the Dhauliganga River in Pithoragarh, Uttarakhand. A Project Development Agreement (PDA) was entered into with the Government of Uttarakhand to carry out studies and investigations, to prepare the Detailed Project Report (DPR) and to develop and operate the project. SMEC, Australia has been appointed as the consultant for preparation of DPR.
Other hydroelectric projects in Arunachal Pradesh (on BOOT Basis) – RECENTLY ACQUIRED :
Kalai II HEPP- for 1,200 MW Kalai-II hydroelectric Project on the river Lohit in Anjaw District,
Amulin HEPP- for 420 MW Amulin hydroelectric project on the river Mathun in Dibang Valley District
Emini HEPP- for 500 MW Emini hydroelectric project on the river Mathun in Dibang Valley District
Mihundon HEPP- for 400 MW Mihundon hydroelectric project on the river Mathun in Dibang Valley District.
SUMMING UP :
While these are the various news on R’Power’s various Projects – Anil Ambani will surely be giving a more updated and correct picture of R’Power in his forthcoming AGM speech. With the friendliness between the 2 brothers getting thicker – it seems – government allocations of gas also may not be a problem in future, as Government also has POWER – as a TOP priority area.
Keeping in view all these news and the likely faster track implementation of various projects in future – in 2 to 3 year’s time, R’Power is likely to become the TOP POWER GENERATION COMPANY in India. And, probably the most efficient one as well.Of course, most projects are due for commissioning in 2012 and onwards – which makes it a long term investment – but almost a sure BET multi bagger for investors, given the efficient project executions so far.
FINANCIAL RESULTS OF FY 10
The financial results for FY10 as of now are of not much consequence. Next Qtr results may be more indicative of profit margins. The public shareholding in the company is a mere 15.22%. So, there is sufficient scope for a public / rights issue or some thing like that in future – considering government’s move to enhance public holding to 25% minimum. The reserves of Rs.12066.24 Cr indicates a healthy reserves position.