Adani Power's future hinges on outcome of legal issues
The lack of provision to pass on high fuel costs to end users is limiting Adani Power's ability to reap benefits from its expanded power capacity.
By Jwalit Vyas, ET Bureau | Updated:
MUMBAI: The lack of provision to pass on high fuel costs to end users is limiting Adani Power's ability to reap benefits from its expanded power capacity. As a result, Gujarat based thermal power company reported net loss for the March 2013 quarter, its sixth consecutive quarterly loss.
The company’s aggregate loss has now increased to Rs 3000 crore over the last six quarters and its future earnings hinge on the outcome of the legal events related to revision of power purchase agreements with Gujarat and Haryana state electricity boards.
In the March quarter, though the company’s generation increased by 80% year-on-year and average realization by 12%, its net margin was impacted due to higher depreciation and interest expense from 140% higher capacity year on year. Given this, the loss doubled to Rs 586 crore.
The company has been facing loss after the coal cost rose due to regulatory changes in Indonesia, two years ago. It currently has operational capacity of around 6000 MW. Most of this capacity runs on imported coal sourced from Indonesia.
The losses are likely to continue until the tariffs are revised upwards by the Gujarat and Haryana state electricity boards. The rising loss is eroding the company’s networth, while the debt continues to remain high. At present, the company’s total debt is around Rs 37,600 crore and its equity is around Rs 8,600. Its debt to equity is 4.4, which is on the higher side. In the likely situation that the company continues to make loss in the current fiscal, this ratio is likely to deteriorate further. Considering this, tariff revisions by the end of the June quarter for its Mundra plant is of utmost importance to the company.
The company’s aggregate loss has now increased to Rs 3000 crore over the last six quarters and its future earnings hinge on the outcome of the legal events related to revision of power purchase agreements with Gujarat and Haryana state electricity boards.
In the March quarter, though the company’s generation increased by 80% year-on-year and average realization by 12%, its net margin was impacted due to higher depreciation and interest expense from 140% higher capacity year on year. Given this, the loss doubled to Rs 586 crore.
The company has been facing loss after the coal cost rose due to regulatory changes in Indonesia, two years ago. It currently has operational capacity of around 6000 MW. Most of this capacity runs on imported coal sourced from Indonesia.
The losses are likely to continue until the tariffs are revised upwards by the Gujarat and Haryana state electricity boards. The rising loss is eroding the company’s networth, while the debt continues to remain high. At present, the company’s total debt is around Rs 37,600 crore and its equity is around Rs 8,600. Its debt to equity is 4.4, which is on the higher side. In the likely situation that the company continues to make loss in the current fiscal, this ratio is likely to deteriorate further. Considering this, tariff revisions by the end of the June quarter for its Mundra plant is of utmost importance to the company.
Too busy to trade in stocks? Invest in Mutual Funds with ET Money!
Bookmark or read stories offline -
Download ET Markets APP
Download ET Markets APP
ADVERTISEMENT
