Adani in the news

Budget 2012: Levy cut to benefit Adani Power, JSW Energy most
The Economic Times - March 20, 2012

Adani Power and JSW Energy will be the biggest beneficiaries from the reduction in Custom duties on coal, as most of their current operational capacity is fired by imported coal.

Customs duty on imported coal has been slashed from 5% to zero and countervailing duty has been reduced from 5% to 1.1%. This will reduce the imported fuel cost by close to 9%.

JSW Energy has no captive mine and its coal requirement is sourced from the global market. Also, the company sells most of its power in the spot market. Due to the rise in coal prices in the last one year, the company's fuel to sales ratio in the first nine months of the current fiscal was 70% compared to 59% in the last fiscal.

The company has an operational capacity of close to 2,100 MW which is run on imported coal. This capacity is expected to increase to 3,140 MW by the end of FY13. Coal used for the augmented capacity will also be imported. The exemption on duties will boost the company's earnings by around 30% in the next two years.

Like JSW Energy, Adani Power too sources coal from global markets for a good part of its capacity. It has an operational capacity of close to 2,640 MW and less than 10% of its capacity is based on domestic fuel. By FY13 end, it will be adding another 9,240 MW. Out of this, 4,620 MW is linked to domestic coal supply while the 4,620-MW Mundra project will be fired by imported coal.

The company will need around 11-12 million tonnes of imported coal, part of which will be sourced from captive mines in Indonesia and the rest from spot markets. The Customs duty exemption will reduce the company's fuel cost by around 9% and boost earnings by a further 25-30% in FY13.

The finance minister advising Coal India to sign fuel supply agreements is a positive for the company. These companies will also benefit from the allowance to refinance their rupee debt with foreign borrowings and reduction of withholding tax from 20% to 5%.