>TATA POWER (JP MORGAN)

CONSOLIDATED RESULTS IMPACTED BY GOODWILL WRITE-OFF - ALERT

• Tata Power reported consol. PAT of Rs12.6B, lower than our estimate of Rs16.8B – the variance arose from: (1) goodwill impairment charge of Rs2.8B that the company decided to take on its overseas coal mining subs, and (2) prior period tax liabilities of coal mining subs – Rs1.91B. Management stated in its conference call that this additional tax liability pertains to the period before TPWR took a stake in the coal mines: thus, Bumi would reimburse the amount as agreed (Rs2.15B totally incl other adjustments).

• Electrical business EBIT at Rs13.9B (up 16%) was in-line with estimate, and the growth largely came from 100% consolidation of Delhi distribution (treated as JV in FY08). Even though NDPL PAT declined 40% as a result of a one-time depreciation reimbursement of Rs2.25B in FY08, NDPL managed to earn Rs790M incentives by surpassing its loss reduction targets.

• Coal segment EBIT registered a sharp 272% increase, due to strong contracted coal prices, coupled with the 12-month consolidation vis–a-vis 9- months in FY08. The reported EBIT of Rs14.6B corresponds to our estimated EBIT of Rs17.5B (based on Bumi IJ’s reported nos) less goodwill impairment charge. The write-off came as a surprise to us, because we believe the coal mines are worth more than what the company has paid for, reflected in its book value.

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