Fundamental Analysis of Adani Power: Operational and Financial Performance

Adani Power (APL), a part of the diversified Adani Group, is the largest private thermal power producer in India. The company and its subsidiaries sell the electricity produced by these projects through a mix of merchant sales, short-term PPAs, and long-term PPAs.

With a combined power output capacity of 15,250 MW, comprising 40 MW of solar power and 15,210 MW of thermal power, Adani Power is the largest private thermal power producer in India. Of this, 1,600 MW of capacity is used to deliver power to Bangladesh, and the remaining 13,650 MW are used to supply power within India. Furthermore, a 1,600 MW Ultra-supercritical power plant expansion project is currently under progress, which, when completed, will increase the operating capacity to 16,850 MW.

Operational Performance of Adani Power

Adani Power has acquired four thermal power plants totalling 4,370 MW. These include a 1,370 MW plant in Raipur, Chhattisgarh; a 600 MW plant in Raigarh; a 1,200 MW plant in Udupi, Karnataka; and a 1,200 MW plant in Bandhaura, Singrauli, Madhya Pradesh, which is operated by subsidiary Mahan Energen Limited.

With low debt per MW of capacity and robust cash flows, Adani Power has emerged as a stronger and more profitable business after overcoming many obstacles. It currently intends to add more power plants and establish new brownfield projects at current locations to increase its capacity even further to 24,270 MW.

During FY 2023-24, Adani Power posted a strong improvement in its operating performance, which was attributable to growing power demand, better domestic coal availability and lower prices of imported coal, in addition to capacity growth from the addition of the 1,600 MW Godda Ultra-supercritical thermal power plant, which was commissioned during Q1 FY 2023-24.

The aggregate Plant Load Factor (PLF) achieved by Adani Power on a consolidated basis during FY 2023-24 was 64.7%, which was significantly higher than the PLF of 47.9% achieved during FY 2022-23. Average operational capacity for FY 2023-24 increased to 15,051 MW with the commissioning of the 1,600 MW Ultra-supercritical power plant of Adani Power (Jharkhand) Limited at Godda, Jharkhand, in comparison to 13,650 MW of operating capacity in FY 2022-23. The installed capacity as of March 31, 2024 was 15,250 MW.

Financial Performance of Adani Power

In FY 2023–24, Consolidated Total Income increased by 40% to ₹60,281 crore from revenue of ~ ₹43,041 crore in FY 2022–23. A larger one-time revenue recognition due to regulatory claims, enhanced tariff realisation, capacity addition, and higher volumes were the causes of this growth. Comparing the Total Income for FY 2023–2024 to the one-time prior period recognition of ~ ₹5,772 crore for FY 2022–2023 reveals that the former includes recognition of prior period income of ~ ₹9,322 crore due to domestic coal deficit, carrying cost, and late payment premium under PPAs.

Consolidated EBITDA for FY 2023–2024 was ~ ₹28,111 crore, a 96% increase. Along with the benefit of higher volumes and higher revenue recognition from earlier periods, the better contribution from improved fuel cost recovery and the inclusion of the Godda plant’s revenues contributed to this improvement in EBITDA.

As of March 31, 2024, the total borrowing stood at ₹34,457 crore, while as of March 31, 2023, it was approximately ₹42,252 crore. The reduction was mostly due to using internal accruals and regulatory cashflows to prepay term loans; the addition of debt for the recently commissioned Godda power plant offset this in part.

SWOT Analysis of Adani Power

Strengths

• APL possesses proven capability to execute large and complex projects within cost and time budgets.
• Dedicated teams with domain expertise in O&M, fuel management, power sector regulation, project management, and business development.

Weaknesses

• Reliance on monopolistic state-owned coal suppliers for domestic coal could lead to disruptions in fuel availability.
• 15% capacity exposed to short-term market risks or long-term, firm domestic fuel supplies.

Opportunities

• Growing power demand with increasing need for base load power in the backdrop of increasing penetration of intermittent power sources.
• Stressed power assets with locational advantage available in superior valuations, an opportunity to enhance capacity while avoiding execution risks.

Threats

• Growing preference for renewable power could limit thermal power demand.
• Hesitation of state DISCOMs to tie power demand through long-term PPAs.

Adani Power Share Price Performance

Adani Power shares delivered a return of ~20.36% and 100.60% in the past 6 months and 1 year, respectively. On August 27, 2024, Adani Power shares opened at ₹665.00 and touched the day high of ₹671.75 at 12:24 PM.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.