>ADANI POWER: 1,320MW project award in MP is positive (UBS)

■ Adani Power has been awarded LOI for a 1,320MW project in MP
Adani Power (APL) has been awarded Letter of Intent (LOI) by Madhya Pradesh Government to develop 1,320MW power project at Chhindwara. The project is like a Case 2 bid (similar to UMPPs) and has significant advantages for Adani Power in the form of; a) land availability, b) state government support for obtaining fuel linkages, c) water availability, d) support for infrastructure facility by MP Govt. The project also has a good mix of regulated and open capacity.

■ The project may be commissioned in FY14/FY15
As per the LOI, the first unit of 660MW is to be commissioned in 2Q FY14 and the second unit by end-FY14. We believe Adani Power has made reasonable progress on this project as the company has already invited EPC bids for the project.

■ We don’t include under development/under planning projects in valuation
In our current price target, we only include 6,600MW of commissioned/under construction capacity (4,620MW Mundra and 1,980MW Tiroda). We don’t include 3,300MW and 6,600MW of under development and under planning projects respectively. As highlighted in our initiation report, Adani Power: An emerging utility major dated 25th November 2009, this could add ~26% in our price target.

■ Valuation: Maintain Buy and price target of Rs130
We derive our PT using a plant-by-plant DCF (for 6,600MW of commissioned/ under construction capacity), assuming COE of 13.2%. Developments in APL are similarly positive for its parent entity, Adani Enterprises (AEL); APL contributes ~62% of our SOTP-based PT of Rs550 for AEL (maintain Buy).

To read the full report: ADANI POWER