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Wednesday, November 5, 2008

GVK Power -A Play On The KG2 Gas

Scripscan:GVK Power
Traded in:nse-bse

Introduction:GVK Power has a valuable basket of assets ranging from power plants to airports and coal mines. In its pre-occupation with global factors, the market is ignoring value at hand.GVK Power has two power plants, the 220 MW Jegurupadu-II and 464 MW Gautami plant. These are lying idle due to non availability of gas. Gas availability is expected to commence from January 2009. This should help to increase its revenues in its power division.MIAL has been allotted around 2000 acres of land for development of the Mumbai Airport. Out of this, around 10% will be available for commercial development. With projects ranging from power, infrastructure, realty, coal mines and expected oil and gas blocks GVK Power is expected to put up a good performance in the coming year and post good numbers. More importantly, in three-four months, GVK Power will announce commercial production.

Airport assets:GVK Power & Infrastructure (GVK) has a stake in the development project of the Mumbai Airport. In the consortium, Mumbai International Airport (MIAL), GVK owns around 36% stake. According to the concession agreement, MIAL has to share 38.7% of revenues with AAI. The project entails spending Rs 6000 crore to refurbish the existing terminals and building a common terminal for both domestic and international flights by FY11E.The capacity of the airport is to cater to 4-4.5 crore passengers. MIAL''s aeronautical revenues from FY10E will be linked to 11.6% WACC according to the concession agreement. The main source of revenue in developing private airports is the nonaeronautical revenues in which MIAL signed a three-year advertising contract. This is expected to rake in Rs 64 crore in FY08.We also expect non-aeronautical revenues for MIAL to rise threefold in FY10E. MIAL has been allotted around 2000 acres of land for development of the Mumbai Airport. Of this, around 10% has been made available for commercial development according to the concession agreement.

Jegurupadu (Phase-I):This project is a 217 MW mixed fuel combined cycle power plant located in Andhra Pradesh. The project is facing shortage of natural gas. It is operating at around 60-70% PLF. The supply of natural gas is likely to commence from January 2009.

Jaipur-Kishangarh Expressway (JKE):This is a toll road project, which involves four-laning of a two-lane road in Rajasthan. Revenues from roads increased 25% to Rs 34.8 crore in Q1FY09 from Rs 30.4 crore in Q1FY08. This asset will continue to perform well.

GVK Coal (GC):This project has equity IRR in excess of 35%. The captive coal mine in Jharkhand has reserves of around 55 million tones.

GVK Oil & Gas Exploration:GVK, together with BHP-Billiton, had bid for the exploration of seven oil and gas blocks under the government's NELP-VII programme. The consortium has been declared as the preferred bidder for all seven blocks, which are located on the west coast of India.The corporate has a valuable basket of assets under its belt. While the market is pre-occupied with global crisis, it is ignoring the stocks underlying strength.

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