 "Torrent Power soars on power agreement with Gujarat Electricity Comm")
Shares of Torrent Power hit a fresh 52-week high of Rs 292, up 4 per cent intra-day on BSE, surging 21 per cent in past one week, after the company entered into a power procurement arrangement with Gujarat Electricity Regulatory Commission (GERC).
On Tuesday, June 25, the company, through a regulatory filing said that GERC had given approval to a 278 megawatt (MW) power project between the company's UnoSugen Power Plant and its licensed distribution business for cities of Ahmedabad, Gandhinagar and Surat.
“The approval, with certain stipulations, is for the balance life of the plant i.e. 19 years,” it said.
The approval, however, has come with riders. A cap on fixed costs might lead to reduced return on equity but might help the plant in securing its debt obligations.
“According to the tariff order, the power procurement arranegement (PPA) is subject to the purchase cost from UnoSugen (gas cost + fixed charges) not being more than the cost of medium-term power. The implied landed cost of power (including transmission) based on the recent medium-term contract will be ~ Rs 5/kWh which becomes the ceiling price for Torrent Power,” analysts at Motilal Oswal Financial Services said.
They added that at a negotiated annual fixed charge of Rs 2.28b, the company will achieve Profit Before Tax (PBT) break-even.
The approval, however, has come with riders. A cap on fixed costs might lead to reduced return on equity but might help the plant in securing its debt obligations.
“According to the tariff order, the power procurement arranegement (PPA) is subject to the purchase cost from UnoSugen (gas cost + fixed charges) not being more than the cost of medium-term power. The implied landed cost of power (including transmission) based on the recent medium-term contract will be ~ Rs 5/kWh which becomes the ceiling price for Torrent Power,” analysts at Motilal Oswal Financial Services said.
They added that at a negotiated annual fixed charge of Rs 2.28b, the company will achieve Profit Before Tax (PBT) break-even.
On the back of “safeguarded” debt obligation, steady growth in distribution and doubling of RE capacity, the brokerage said in a company update.
At 11:07 am, the shares were trading 3 per cent higher at Rs 290 apiece as against a 0.7 per cent rise in the S&P BSE Sensex.
At 11:07 am, the shares were trading 3 per cent higher at Rs 290 apiece as against a 0.7 per cent rise in the S&P BSE Sensex.
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