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Tata Power FY 09 first Quarter Performance
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Tata Power is India’s largest private sector power utility, with a reputation for trustworthiness, built up over nearly nine decades, The Tata Power Company Limited is country’s largest private sector power utility with an installed generation capacity of over 2300 MW. The Company is a pioneer in the Indian power sector, with a track record of performance, customer care and sustained growth. Tata Power has a presence in all the segments of the power sector viz. generation (thermal, hydro, solar and wind), transmission and distribution. The Company won the bid for the first 4000 MW Ultra Mega Power Project at Mundra (Gujarat) and has successful public-private partnerships in generation, transmission and distribution- North Delhi Power Limited with Delhi Vidyut Board for distribution in North Delhi, ‘Powerlinks Transmission Ltd.’ with Power Grid Corporation of India Ltd. for evacuation of Power from Tala hydro project in Bhutan to Delhi and ‘Maithon Power Ltd.’ with Damodar Valley Corporation for a 1000 MW Mega Power Project.Apart from Mumbai and Delhi, the company has generation capacities in Jojobera, Jharkhand and Karnataka. The Mumbai is served by a unique mix of thermal and Hydro Power, generated at the Thermal Power Station, Trombay, and the Hydro Electric Power Stations at Bhira, Bhivpuri and Khopoli, totaling 1797 MW. Its diverse generation capability facilitates the company in producing low cost energy, thereby giving its consumers a greater value for money. Among its many achievements that Tata Power can proudly boast of are the installation and commissioning of India’s first 500 MW unit (at its Thermal Power Generating Station, Trombay) the 150 MW Pumped Storage Unit at its Hydro Generating Station, Bhira, and environmental control systems like the Flue Gas Desulphurization plant. Tata Power has a first of its kind joint venture with Power Grid Corporation of India for the 1200 km Tala Transmission Project. North Delhi Power Limited: A joint venture with the State Government of Delhi, the NDPL serves over 8 lakhs consumers with a peak load of 1050 MW, also providing state-of-the-art technology driven processes for enhancing consumer billing and related services. Tata Power Trading Company Limited (TPTCL), a wholly owned subsidiary of the Tata Power Company (TPC) has been awarded the first ever power trading license by the Central Electricity Regulatory Commission (CERC) under section 14 of the Electricity Act 2003, enabling it to carry out transactions all over India. International Projects: Tata Power has carried out several overseas projects and successfully completed erection, testing and commissioning of major power projects in Saudi Arabia, Bangladesh, Kuwait, Algeria, Myanmar and Thailand. The company has also undertaken projects pertaining to power plant / operations management and plant operations training. Strategic Electronics Division (SED):The Strategic Electronics Division of Tata Power has been in operation for over 30 years and has been pursuing development and production activities for the Indian defense sector. SED successfully developed the Multi Barrel Rocket Launcher, ‘Pinaka’, proven in the field through extended user trials which led to its induction into the Indian Army. The Division has developed specialized equipment for Air Defense and Naval Combat systems. Corporate Social Responsibility Tata Power is committed to setting high standards in its pursuit of social responsibility and has initiated programs to preserve biodiversity through planting new tress in its forestation efforts and preserving the fish varieties by careful creating of environment for them to reproduce. It has initiated and continues to support socially relevant programs such as family planning, health services, primary and secondary education etc in tiny hamlets and tribal regions, where the company’s tapping energy/ resources. AwardsTata Power has been awarded the Quality Circles AWARD 2007 at the “National Convention on Quality Circles” under the aegis of Quality Circle Forum of India.Jojobera Division has been recognized by the National Safety Council of India and awarded the “Suraksha Puraskar” in recognition for developing and implementing very effective Safety Management Systems and Procedures and achieving very good performance in safety during the assessment period of three years – 2003-05.Recent DevelopmentsTata Power has recently signed an agreement with Bhutan to develop 114 MW hydro electric project. This will be located near Dagachhu. The company will hold 26% equity stake in the joint venture. It has also entered into a power purchase agreement for a period of 25 years. The power generated will be evacuated to the North Eastern Electric Grid using Tata Transmission link.The company has its right of distributing power in Mumbai affirmed by Supreme Court of India. It is notable that the company has been serving Mumbai clients for the past 90 years.The First Quarter FY 09 Results Highlights
Tata Power posted higher revenues, which went up by 36% at Rs. 20.49 Billion (Rs 15.11 Billion). The electric generation was flat at 3.935 Billion units and sale too did not improve remaining steady at 4.115 Billion Units. The rising cost of coal and other inputs have led a decline in operating margins.Growth Plans:250 MW Trombay Unit 8: The 250 MW Unit 8 expansion project at Trombay is also progressing as per schedule and will be commissioned by October 2008.4000 MW, Mundra Ultra Mega Power Project: is progressing as per schedule. Orders for the main equipments have been placed and site preparatory works are in progress. This project has been financially closed with a consortium of banks and financial institutions.1050 MW Maithon Power Project: is progressing as per schedule. Orders for the main equipments have been placed and site preparatory works are in progress. . Maithon project has tied up funds of Rs. 44.50 Billion, at a debt equity ratio of 70:30 Wind Farm Projects:During the quarter, 50.4 MW Khandke Project was completed. Two additional wind projects of 50.4 MW each are being developed in Jamnagar district at Gujarat and Gadag district at Karnataka. Order has been placed on Enercon for setting up these machines. 120 MW Power Project at Haldia: The Haldia power plant based on coke oven gases is progressing as per schedule and will be commissioned in 2008. Captive Power Projects for Tata Steel: The 120 MW Power House # 6 at Tata Steel Works, Jamshedpur and 120 MW Unit # 5 at Jojobera are also progressing as per schedule and will be commissioned in the next financial year.Captive Coal Blocks:Tubed Coal Block in Jharkhand: A Joint-Venture has been formed with the Company and Hindalco and Tubed Coal Mining Limited has been registered.Mandakini Coal Block in Orissa: The screening Committee of Ministry of Coal has allotted Mandakini Coal Block in Orissa jointly to Tata Power, Jindal Photo and Monnet Ispat. Heads of agreement has been signed with JV partners. What does the future hold for this company?A perfect future is in store. The company has ambitious plans to augment its generation capacity over 12,000 MW by 2012 from the current 2,300 MW.India would require an additional 100,000 MW of power by 2012 to provide enough electricity to propel its economic growth. The 11th Five-Year Plan (2007-11) has been fixed additional power generation capacity at 78,577 MW. According to the CEA (Central Electricity Authority), the total installed capacity amounted to 132,329 MW as on March 31, 2007. Central government undertakings accounted for approximately 34.10% of total generation capacity, state government entities for 52.97% and private sector companies for approximately 12.93%. Already 2,515 MW projects have already been commissioned and 52,430 MW (66.7% of the proposed capacity) projects are under construction for which required contracts have been already placed. Consumption levelThe growing Indian economy, accent on knowledge based work culture has given a push to India’s per capita power demand. It is expected to rise to 1,000 units per year by 2012. Still very much low compared to China or Brazil, not to speak of developed countries.Tata Power signed a $1.1-billion (Rs 4,950 crore) deal to buy a 30% stake in two Indonesian coal companies, and in a related coal trading company, all promoted by PT Bumi Resources Tbk (Bumi), Indonesia. L Kaltim Prima Coal and PT Arutmin Indonesia are two of Indonesia's largest coalmines, which together produced 53.5 million tons in 2006, of which 95% were exported. Tata Power has also signed an off-take agreement with Kaltim Prima, which entitles it to purchase 10 million tons of coal per annum. Tata Power will make this acquisition through an offshore special purpose vehicle (SPV). Funding would be through a combination of debt in SPV, internal accruals and borrowings. The company will require 21 million tons of imported coal for its planned projects. The Indonesian deal will take care of 50% of Tata Power's requirements.What are the risks?The company is planning to increase its capacity by 5 times of the present levels. This exposes the company to execution risks.The major growth to revenues will accrue from the increases in plant load factor putting the maintenance activity to cope with higher load.The distribution business in constrained by the social objectives and does not allow the power producers to earn above the returns envisaged by the regulators. 
The company is very strong in fundamentals and has investments in telecom business where the markets have been expanding at over 40%. It has planned to invest $ 500 million in shipping vessels to secure it from freight rate fluctuations from affecting cost of delivered coal. The company is importing 22 million tons of coal requiring 9 cape size vessels. It has already contracted three vessels on long term basis. The high P: E is unlikely to tempt an investor in to going long in this share. The prices of this share has not fallen as much as other company ‘s so far. India going ahead with Nuclear deal will benefit power sector related companies. Tata power is a candidate for any private sector participation in Nuclear Power Generation. This presents stock an opportunity to long term investors to get into the share especially at price levels of Rs. 900-1000 around.
| Rs Millions | June ' 08 | Mar ' 08 | Dec ' 07 | Sep ' 07 | Jun ' 07 |
| Sales | 20,491 | 16,345 | 14,194 | 13,506 | 15,115 |
| Operating profit | 3,190 | 1,383 | 2,635 | 2,703 | 2,903 |
| Interest | 522 | 282 | 386 | 414 | 594 |
| Gross profit | 2,669 | 3,345 | 2,664 | 3,604 | 2,993 |
| Depreciation | 731 | 777 | 705 | 709 | 714 |
| Net profit / loss | 2,250 | 2,250 | 1,973 | 2,574 | 1,902 |
| Equity capital | 2,207 | 2,207 | 2,181 | 2,078 | 1,979 |
| EPS (Rs) | 7.38 | 10.19 | 9.05 | 12.39 | 9.61 |
| OPM (%) | 15.57% | 8.46% | 18.57% | 20.01% | 19.21% |
| GPM (%) | 13.03% | 20.47% | 18.77% | 26.68% | 19.80% |
| NPM (%) | 10.98% | 13.77% | 13.90% | 19.06% | 12.58% |
Summary
The company is very strong in fundamentals and has investments in telecom business where the markets have been expanding at over 40%. It has planned to invest $ 500 million in shipping vessels to secure it from freight rate fluctuations from affecting cost of delivered coal. The company is importing 22 million tons of coal requiring 9 cape size vessels. It has already contracted three vessels on long term basis. The high P: E is unlikely to tempt an investor in to going long in this share. The prices of this share has not fallen as much as other company ‘s so far. India going ahead with Nuclear deal will benefit power sector related companies. Tata power is a candidate for any private sector participation in Nuclear Power Generation. This presents stock an opportunity to long term investors to get into the share especially at price levels of Rs. 900-1000 around.
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