>TATA POWER COMPANY LIMITED (HDFC SECURITIES)

Q1FY10 Result Update August 05, 2009

Tata Power Company Ltd (TPC) is India’s largest private sector, integrated utility company. TPC has an installed power generating capacity of about 2,786 MW. The Mumbai power business has a unique mix of thermal and hydropower. Also, through its subsidiaries
and joint ventures, TPC has a presence in power transmission, distribution and trading. In June 2007, TPC acquired a 30% stake in the KPC and Arutmin mines of Bumi Resources and is thus focusing on backward integration and fuel security.

TPC came out with its Q1FY10 results and we present an update post the Q1FY10 conference call. The management intends to have a separate call in August 09 to discuss the performance of TPC – consolidated and hence this review only considers its standalone GTD
(generation, transmission and distribution) business.

TPC reported total income of Rs. 2,123.2 cr in Q1FY10, up 0.5% y-o-y and 18.9% q-o-q. Operating margins increased to 30% vs 13.5% in Q1FY09 due to the inclusion of Rs. 232.4 cr as part of revenue which pertains to previous years due to MERC tariff orders and
judgment of ATE received during this financial year. Excluding the impact of this, margins increased to 20.6% on the back of lower cost of fuel and lower cost of power purchased. TPC reported a PAT of Rs. 377.1 cr, up 98.1% y-o-y and up 6.3% q-o-q buoyed by higher
generation, lower fuel costs, receipt of previous year revenue and impact of FY09 capacity expansion. However, on a y-o-y basis adjusting for the one time item of Rs. 232 cr, PAT increased by 22.7% to about Rs. 233 cr.

KEY HIGHLIGHRTS OF THE Q1FY10

■ In Q1FY10, TPC reported a topline of Rs. 1,975.6 cr, down 0.7% y-o-y and up 39.5% q-o-q. This includes an amount of Rs. 232.4 cr pertaining to previous years due to MERC tariff orders and judgment of ATE received during this financial year. Thus, based on a like by like comparison, revenue in Q1FY10 is at Rs. 1,743 cr, lower by 12.4% y-o-y. This fall is mainly explained by a decrease in fuel cost and thus a corresponding decrease in the price of power per unit sold.

■ On a q-o-q basis, the increase in revenue is higher due to the Rs. 232 cr of one time adjustment to revenue, an increase in the number of units sold and a marginal increase in the selling price per unit sold. The same has been summarized in the table given
below.

■ Total generation increased by 8.3% y-o-y and 19.5% q-o-q due to commissioning of 421 MW in FY09, the impact of which can be seen in this quarter. Sales in the MLA (Mumbai License area) were flat y-o-y at ~3,000 mn units while sales outside the MLA increased by 6% y-o-y. Sales on a y-o-y basis increased by 1.6%. While Trombay Thermal Power Station generated 2,778 MUs of power as compared 2,669 MUs in the previous year (4.1% increase y-o-y mainly due to the replacement of operations from Unit 4 with Unit 8), the Jojobera Thermal Power Station recorded a generation of 803 MUs during the quarter as compared to 784 MUs (an increase of 2.4% y-o-y). The Belgaum Independent Power Plant (IPP) generated 107 MUs during the year as compared to 92 MUs (increase of 16.3% y-o-y possibly due to the lower cost of heavy fuel oil and increased demand from KPTCL).

■ Generation can be expected to increase in the quarters to come as Trombay Unit 8 (250 MW) and Haldia 90 MW are still under stabilization stages. TPC sold about 240 mn units on merchant basis (100 MW of capacity at Trombay and Haldia are available for merchant power sale). The tariff in the western region (Trombay) was in the range of Rs. 6.6 per unit and in the eastern region (Haldia) at Rs. 5 per unit. Merchant power sales are also expected to increase once these units stabilize. On a q-o-q basis, the sharp jump in number of units generated is partly due to the fact that generation was lower in Q4FY09 as there was a planned outage at Trombay Unit 6 during Q4FY09.

To see full report: TATA POWER