Torrent Power secured a Letter of Award (LoA) from Madhya Pradesh Power Management Company Ltd. (MPPMCL) for a 1,600 MW coal-based thermal project on Saturday, August 30.
Morgan Stanley said it believes the plant can generate a 15% – 17% internal rate of return (IRRs), assuming a 70-30 debt equity ratio.The brokerage believes the capacity charge could be ₹4.1 – ₹4.3 per unit. It also said the company’s balance sheet has sufficient headroom for growth with the current net debt to EBITDA of 1.4x and net-debt to equity of 0.4x.
About the project
The greenfield plant, based on 2×800 MW ultra-supercritical technology, will be developed under the design, build finance, own and operate model at a tariff of 5.829 per kWh. The project is Torrent Group’s single largest investment in the power sector. It is to be commissioned within 72 months of signing the power purchase agreement and will supply its entire capacity to MPPMCL.
MPPMCL will arrange coal for the facility under the ministry of coal’s SHAKTI policy. Torrent Power said the facility will use ultra-supercritical technology, which is more efficient and emits less carbon in comparison with conventional plants.
The project is also expected to generate 8,000 to 10,000 jobs during construction and around 1,500 jobs once it is operational.
Of the 10 analysts that have coverage on the stock, two have a “buy” rating and four each have “hold” and “sell” ratings.
Shares of Torrent Power gained 6.9% just after market open on Monday. However, the stock later pared its gains and was trading 1.1% higher at ₹1,240 apiece. It has declined 16.4% this year, so far.
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