PTC India Limited - Another victim of a depreciating Rupee - Antique

The recent INR depreciation of 7.1% against the USD over April-mid June'13 is negative for power companies importing coal to fuel their power projects. PTC India currently imports 1.2mmt of coal from Indonesia to fuel its 200MW tolling project in Krishnapatnam which will increase to 2.2mmt once its 150MW tolling project with Meenakshi commissions in 2HFY14. We have revised our estimates of INR/USD assumptions from INR 55/54 to INR 58/57 in FY14e/15e which has led to 13.4%/11.7% decrease in our EBITDA estimates for the period. At INR58/USD the fuel cost for tolling projects will be INR3.2/kWh which will increase from INR2.9/kWh (INR54/USD in 4QFY13) which will lower tolling margins in FY14 is to 84paise/kWh vs INR1.1/kWh expected earlier. Maintain BUY.

Tolling profitability growth muted despite higher PPA rate due to INR depreciation

For the 200MW tolling project with Madhucon (operational since May'12), we understand that PTC has extended its PPA for another 1-year till May'14 with Andhra Pradesh at INR 5.8/kWh. PTC pays Madhucon a conversion charge of INR1.7/kWh (inclusive of service tax) and its 100% subsidiary PTC Energy imports low grade Indonesian coal for the project (USD2/ton coal trading margin). PTC sold 952MUs in FY13 under tolling at INR5.5/kWh with coal cost of INR2.86/kWh (at INR54/USD) and earning EBITDA of INR760m (margin of 80paise/kWh). However with the INR/USD at 58, we expect the coal cost to increase to INR3.2/kWh. Although the revised PPA rate suggests a 30paise increase in tariff, this is offset by INR depreciation and only 84paise/unit margin is expected for FY14 vs INR1.1/kWh expected earlier. PTC has a tolling agreement of 150MW with Meenakshi for its 2nd unit of 300MW which is expected to be commissioned in 2HFY14.

FY14/15 volumes to post a CAGR of 25% over FY13-15e

While power trading volumes have grown at a CAGR of 20% between FY07-13, multiple factors are set to catapult growth from 24.3bn kWh in FY12 to 44.1bn kWh in FY15e. The key driver is commissioning of 760MW and 2.8GW of long-term PPA-based projects in FY14e and FY15e, respectively. In FY13, PTC's volumes were at 28.6bn beating our estimate of 27bn Kwh due to higher short term volumes as there was a shift from the UI market to exchange/bilateral market and some states assembly elections in 2012. With the onset of some more state elections in 2013 and central elections in 2014, we expect the power trading volumes to grow at 25% CAGR over FY13-15e.

Arrears from Tamil Nadu/Uttar Pradesh expected soon after approval of FRP package

As on FY13-end, INR 3.7bn was due from Tamil Nadu and INR 7.7bn (INR4bn PTC's exposure) from Uttar Pradesh, of which TN repaid INR1bn in April'13. With the recent 30% increase in tariff in UP and the SEB FRP Package being at an advanced stage, the balance outstanding will be recovered from both the states by FY14-end. This will help the cash in hand to increase to INR11bn by FY14-end (from the current balance of INR5bn).

Source : Equity Bulls

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