Published: Thu, April 13, 2017
Markets | By Erika Turner

Adani Power, Tata Power continue to shed weight

Adani Power, Tata Power continue to shed weight

There is no question of compensatory tariff. "The order that ATE had given would have benefited CGPL by allowing compensation for higher coal prices the extent of which was to be determined by Central Electricity Regulatory Commission (CERC)", the agency said.

The top court verdict came on a batch of petitions by NGOs and state discoms, contending that the aligning the export price of Indonesian coal with the worldwide market price does not create unforeseeable circumstances that prevent the power generating companies from fulfilling a contract under the PPAs.

In a BSE filing, Adani Power said the court has granted relief for the cost burden arising due to shortage in supply of domestic coal under "change in law" provisions.

The ruling was made by a bench of Justices Pinaki Chandra Ghose and Rohinton Nariman who cited that the compensatory tariff can not be provided due to the rise in price of coal imported from Indonesia. The SC asked the APTEL to expedite the matter.

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"We downgrade Tata Power to Reduce (from Add) and maintain Sell rating on Adani Power, noting the ownership in coal mines and earnings from regulated assets for the former that allow it to better withstand the losses, and the already stretched balance sheet of the latter that may force incremental equity dilution", said Kotak Institutional Equities, in a note issued on Wednesday.

Tata Power is supplying power under a Power Purchase Agreement (PPA) to Gujarat, Rajasthan, Maharashtra, Punjab and Haryana and Adani Power under PPA is supplying power to Gujarat and Haryana from its plant in Mundra. As the close of trade nears, Adani Power was trading at Rs 34.10 and Tata Power had managed to come out of the red and was trading at Rs 85.70.

For Adani Power, they said a full retrospective recovery of compensatory tariff would be worth Rs 23 per share.

However, the apex court ruling says that had the force majeure event been in India, the companies might be entitled to an increased tariff. "But these aspects were discounted by the investors hoping a positive order", said an analyst of a domestic brokerage.

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