>RELIANCE POWER: Projects: Sasan start-up by Dec, Chhatrasal awaits formal FC

1QFY13 normalized EBITDA, PAT a tad below our forecast
At Rs2.27bn, Reliance Power’s (RPWR’s) 1QFY13 normalized net profit was ~3% below our forecast (marginally above consensus); reported PAT was higher at Rs2.4bn on the back of prior period adjustments. RPWR’s top line surprised on the back of third-party power purchases and sale (to meet PPA supply commitment from its Butibori facility), but normalized EBITDA (at Rs3.5bn) was 3% below our/consensus forecast despite sharply lower ‘other opex’. Treasury gains surprised yet again (Rs1.16bn vs our forecast of Rs0.7bn), but were offset by higher-than expected depreciation and interest outgo.

Rosa: RoE remains healthy at 30.7%, albeit down 150bp QoQ
In the first quarter where the entire 1200MW capacity was in commercial operation, the drop in Plant Availability (PAF) from ~92% to 81% led to a 150bp drop in RoE (normalized for prior period revenue) to 30.7%. As per the management, [1] coal mix during the quarter was 51% linkage, 39% imports and 10% domestic market-procured); [2] the receivables cycle remains in check; a combined escrow facility of Rs3.5bn for the entire 1200MW capacity (Phase-I,II) is in the works.

Projects: Sasan start-up by Dec, Chhatrasal awaits formal FC
[1] Coal production from Sasan-linked coal mines is expected to begin shortly; commissioning of Unit-1 (800MW) at Sasan is scheduled in Dec-2012. [2] Formal grant of Forest Clearance (Stage-I) for the Chhatrasal coal block, which would enable RPWR to commence construction of its Chitrangi facility, is awaited. [3] Tato-II (700MW) hydropower project has secured key clearances (TEC, FC) enabling start-up of construction activities. [4] On coal production in Indonesia. RPWR is in the process of awarding contracts for each component of the evacuation chain.

Big-ticket projects still subject to policy diktats; maintain REDUCE
Valuation remains expensive (22.4x FY14F P/E and 1.3x FY14F P/B) and one-half of the FCFE-based fair value remains concentrated in projects (Chitrangi, Sasan-II, Samalkot) wherein operational timelines and profitability remain subject to regulatory diktats and fuel supply risk

To read report in detail: RELIANCE POWER