We visited two of NTPCsa’s (NTPC standalone) major greenfield sites at Solapur and Kudgi, which will add Rs 73.6b or 17% to regulated equity.
We visited two of NTPCsa’s (NTPC standalone) major greenfield sites at Solapur and Kudgi, which will add Rs 73.6b or 17% to regulated equity.The project faced two hurdles – land acquisition for approach rail line and delays in coal handling plant due to financial stress of vendor. NTPC overcame the first by building a viaduct and the second by dealing directly with the sub-vendors. The project sources water from the Almatti dam, which is 43km away. The first unit of 800MW (Unit-1), which began commercial generation on July 31, 2017, commercial operational date; CoD, was operating at 511MW . Though the ECR, energy charge rate is ~Rs 3/kwh, it is getting scheduled in the merit order.
Coal is being sourced from SCCL under bridge linkages. Unit-2 was commissioned on March 23, 2017. It has also achieved full load, but CoD is pending due to delay in ramping up coal supply. CoD is planned in September 2017. Unit-3 is in the final stages of commissioning . While this unit may be commissioned by December, the CoD may spill over into FY19. The first unit (660MW) was commissioned on April 7, 2017. The unit was running at 264.4MW at the time of our visit. The railway siding too is completed. Coal is being sourced from WCL through bridge linkage. Regular coal supply is linked to MCL. CoD is expected latest by September 26. The ECR is expected to be above Rs 2.5/kwh. Unit-2: Boiler light-up is planned in March 2018. The unit is expected to be synchronised in August 2018 and CoD is planned in December 2018.
NTPC has strong pipeline of CoDs. There is good visibility of 3.7GW of organic and 1GW of inorganic growth at NTPCsa. This will add `81b or 18.4% to regulated equity in FY18. In addition, 445MW will be added to commercial capacity of JVs in FY18. The visibility of CoDs for FY19 too is improving, with expected commissioning of 2.65GW in FY18 . We expect regulated equity to grow at ~20% CAGR and consolidated PAT to grow at 12% CAGR over FY17-20. Capitalisation would start to outpace capex, boosting RoE and driving stock re-rating. The stock trades at 1.3x FY19E BV. We value the stock at `204/share even after factoring 150bp regulatory risk to RoE from FY20 in our DCF model. Maintain buy.