All ur doubts will be cleared??..read the article below with patience.
>Business: R POWER.
>
>The company claims that it will be developing power generation projects
>of 28200 MW over the next decade.
>
>According to the IPO RHP, some of the projects that it will be
>developing
>are:
>
>Rosa-I (to be commissioned in March 2010) - 600 MW - Coal based.
>Butibori (to be commissioned in June 2010) - 300 MW - Coal based.
>Rosa-II (to be commissioned in September 2010) - 600 MW - Coal based.
>Shahpur Gas (to be commissioned in March 2011) - 2800 MW - Gas based.
>Shahpur Coal (to be commissioned in December 2011) - 1200 MW - Coal
>based. Dadri (to be commissioned in March 2013) - 7480 MW - Gas based.
>Krishnapatnam (to be commissioned in September 2013) - 4000 MW - Coal
>based. Urthing Sobla (to be commissioned in March 2014) - 400 MW -
>Hydropower based.
>Tato II (to be commissioned in March 2014) - 700 MW - Hydropower based.
>MP Power (to be commissioned in July 2014) - 3960 MW - Coal based.
>Siyom (to be commissioned in March 2015) - 1000 MW - Hydropower based.
>Kalai II (to be commissioned in March 2016) - 1200 MW - Hydropower based.
>Sasan (to be commissioned in April 2016) - 3960 MW - Coal based.
>
>If
>
>everything goes as planned, capacity of Reliance Power at end of each
>year till 2016 will be:
>
>2008: 0 MW.
>2009: 0 MW.
>2010: 1500 MW.
>2011: 5500 MW.
>2012: 5500 MW.
>2013: 16980 MW.
>2014: 22040 MW.
>2015: 23040 MW.
>2016: 28200 MW.
>
>============ ========= ========= =========
>
>Other Similar Companies:
>
>I can think of two companies in the power generation sector that
>Reliance Power can be compared with:
>
>NTPC and Tata Power.
>
>NTPC has current capacity of 28000 MW and has target to achieve 66000
>MW by 2017. ( See this thread on NTPC).
>
>Tata Power has current capacity of 2300 MW.
>It will be adding 10000 MW of capacity more by 2012. Thus, it will have
>a capacity of around 12300 MW by 2012 end. The additions will all be
>coal based. -Mundra Ultra Mega Power Project -4000 MW.
>-Power plants in Maharastra - 3000 MW.
>-Captive power plants for Tata Steel - 2000 MW
>-Maithon Power Plant at Jharkhand - 1000 MW.
>
>Tata Power also has other smaller business and also wants to enter
>shipping and logistics. Besides that Tata Power has investments valued
>at Rs 400+ per share of Tata Power. This works out to be Rs 10000
>crore.
>
>
>Around 2012 - 2013, both Tata Power is expected to have similar
>capacity as Reliance Power.
>
>The interesting thing is at current price of Rs 1457, Tata Power is
>valued at just Rs 30000 crore. Remove Rs 10000 crore of investments and
>you can have it only for Rs 20000 crore.
>
>At Rs 900, Reliance Power will have market value of 200000 crores....6.
>67 times that of Tata Power. .
>
>============ ========= ========= ========= =
>
>Financials:
>
>With 2300 MW capacity, Tata Power made standalone profit of Rs 700
>crore in FY 2007.
>
>With 28000 MW capacity, NTPC made standalone profit of Rs 6900 crore in
>FY 2007.
>
>Lets assume Reliance Power turns out to be much more efficient than
>these two companies. Add to that increased power rates.
>
>With 28200 capacity, assume Reliance Power makes Rs 15000 crore of net
>profit in 2016-2017. Power companies are considered as utilities and
>worldwide trade at 10-15 times their earnings.
>
>Lets assume 15 times ratio for Reliance Power in 2016.
>
>What will be its market value?
>
>15000 X 15 = Rs 225000 crore or Rs 995 per share.
>
>This is an optimistic view:
>-there will be no further equity dilution till 2016.
>-assuming nearly twice as much efficiency as NTPC.
>-that all projects will be completed before 2016 end.
>-the company would have paid back all debt by then and interest costs
>would be in similar range as NTPC.
>
>(NTPC already has established 28000 MW capacity and comparatively much
>lesser interest costs. (NTPC's P&L account states Rs 1800 interest cost
>for FY 2007).
>
>So what about the debt?
>
>The RHP mentions estimated cost of six projects Rosa I, Rosa II,
>Butibori, Sasan, Shahpur Coal, Urthing Sobla as Rs 30000 crore+.
>
>Analysts estimate that Reliance Power will need Rs 70000 crore of debt
>to finance its projects which are estimated to cost 100000 crore+.
>
>Rs 70000 crore of debt is not going to come at 2% interest rate. Even a
>6% interest would mean an annual interest cost of Rs 4200 crore. Only
>in 2013, the company's capacity will cross 10000 MW. Thus, I do not
>expect any major debt repayment before 2014. If things don't go as
>planned, the debt burden will make a mockery of the balance sheet.
>
>With Rs 12000 crore raised in equity and Rs 70000 crore of debt, these
>whole business will become a high-risk venture.
>
>Any unforeseen delay/derailment of plans may create major problems for
>this company.
>
>============ ========= ========= ========= =
>
>Reliance Power - The Overlooked Fact:
>
>Is Reliance Power just "Reliance Power"?
>
>No.
>
>It is actually "Reliance Power Limited" - a limited company.
>
> So what does this mean for Reliance Power Limited?
>
>It means if in the rare case, the calculations of the management go
>wrong and the company somehow goes to insolvency, none of the
>shareholders will lose anything expect the value of the shares.
>
>If you are a share holder of Reliance Power and it goes into insolvency
>(unable to pay back debts), what do you stand to lose?
>
>Rs 430 per share.
>
>Lot of money....right?
>
>What does Anil Ambani's AAA Project or REL lose?
>
>Both of them had got their 45% (post-IPO) stake for Rs 1000 crore each.
>Plus they will each subscribe to 1.6 crore shares each at Rs 450 in the
>IPO......which works out to be Rs 720 crore.
>
>Thus, AAA Project will be getting 101.6 crore shares of Reliance Power
>for Rs 1720 crore and REL will be getting 101.6 crore shares of
>Reliance Power for Rs 1720 crore.
>
>Little less than Rs 17 per share.
>
>This is what both the promoters are risking in this project.... Rs 17
>per share ; while investors will be risking Rs 450 per share.
>
>This is exactly the reason why Reliance Power was created.
>
>First, by contributing just Rs 1720 crore each to Reliance Power, the
>promoters have shifted all risk to investors.
>
>Second, by getting 45% stake (in REL's projects) to AAA Project for a
>mere Rs 1000 crore, AAA Projects (and Anil Ambani) have created wealth
>out of thin air.
>
>Anil Ambani's Rs 1000 crore investment will be worth Rs 100000 crore
>when Reliance Power lists at Rs 900.
>
>If the gamble works, the promoters (holding 90% stake in Reliance
>Power) will be worth billions of dollars.
>
>If the gamble doesn't work, the promoters will lose Rs 1720 crore each
>and investors will lose Rs 10000+ crore which they will be paying for a
>mere 10% stake in Reliance Power.
>
>What a way to create wealth...!!! ....I don't have words to describe
>the brilliance of Anil Ambani's plans... .
>
>============ ========= ========= ========= =
>
>First, other companies are much cheaper.
>
>Why should I keep a company valued at Rs 200000 crore -
>
>when another company (with similar capacity by 2013) is available at Rs
>30000 crore with much smaller debt burden and Rs 10000 crore worth of
>investments ...........referrin g to Tata Power.
>
>If Reliance Power (at Rs 900) is available for Rs 200000 crore, why not
>buy NTPC for a similar price ......Rs 225000 crore. NTPC plans to have
>a capacity of 66000 MW in 2017, while Reliance Power will have 28200 MW
>capacity in 2016.
>
>Second, the risk is higher than other existing companies.
>
>With marginally cash flows for next 5 years and Rs 70000+ crore of
>debt, the risk for Reliance Power is high. Tata Power and NTPC have
>existing cash flows to handle expansions.. ..Reliance Power does not.
>
>Third and the biggest factor is....the valuation of the company doesn't
>make much sense.
>
>Why should Reliance Power be valued at Rs 200000 crore, when in highly
>optimistic scenario, it will not make more than Rs 15000 crore of
>profit in 2016 ? Even if it touches that figure of Rs 15000 crore, its
>market value in 2016 will not be much more than 225000-300000 crore.
>(if given a 15-20 times multiple).
>
>A fixed deposit will make more money than that in 8 years.....and that
>too without any risk.
>
>Also, I got the optimistic Rs 15000 crore figure by assuming two times
>margins as NTPC.
>
>The fact is..... at least till 2014, Reliance Power will still be
>carrying most of its Rs 70000 crore debt and its interest costs will
>squeeze margins to a large extent.
& now after all this the cmpny is plannin 2 issue bonus shares to cheer the investors...
--
Cheers.....
Dipesh A. Mehta
Dream Big, Achieve BIG !!!
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