Lanco to wait for final tribunal order on Amarkantak II supply

Lanco Infratech will wait for the final order of the appellate tribunal before beginning supplies from its Amarkantak II project to Haryana.

The tribunal has passed an interim order directing the infrastructure major to supply 65% of the power produced from project to Haryana Power Generation Corporation.

“We think it will take another 15-20 days for the final order to come out. We will wait for the final order,” Suresh Kumar, Lanco’s chief financial officer, told DNA Money.

With the tribunal offering clarity on the share of the power to be supplied to Haryana, the company would supply the balance 35% to Chhattisgarh.

Currently, the entire power produced at the unit is being sold in the UI (unscheduled interchange) market. However, the tariff that has been allowed by the tribunal is not being seen as a favourable development for the company. The tribunal has allowed a tariff of Rs2.32/kwh, which is about 8-10% lower than the UI tariff of about Rs2.80-2.90/kwh.

“Yes, the tariff allowed is lower than the UI tariff. But we are hopeful of an upward revision in the tariff once the final order is out at the tribunal,” Kumar said.

On the lower rates allowed compared to the UI market rate, Suhas Harinarayanan and Sumit Maniyar, analysts with Religare, said in a note on Sunday, “If power is sold at these rates, our EPS (earnings per share) estimates for FY12/13 could drop by 2-3%.” However, the analysts have preferred to wait for the final order before making specific estimates of the EPS.

In fact, the blend of imported and domestic coal at the unit, too, was being seen as a concern by the analysts with the dependence on imported coal going up with an upward impact on the costs.

However, Kumar said, “We will use domestic coal mostly. In any case, the rise in costs would not be much. There is no need for any concern on this front.”

He said the unit’s performance this financial year would improve significantly. The plant load factor (PLF) at the unit has been at about 69-70% in the fourth quarter of the last year. “The PLF will definitely go beyond 70% this year,” Kumar said.

“The PLF for Amarkantak units (600 mw) remained at 69% during the quarter. Utilisation rates have remained low (estimated 70%) during fiscal 2011 due to fuel shortage and weaker realisation in UI/short-term market. However, we expect PLFs to pick up on the back of seasonally stronger demand and improved fuel supply due to blending of coal,” the analysts said.